The International Financial Market in the 21st Century Essay

The transnational Financial Market in the 21st snow - Essay ExampleTo protect themselves against these risks, parties to international transactions, especially the lenders, should take it upon themselves to ensure that the eventuality of disputes in the future will not catch them off apply by conducting extensive assessment of potential risks attached to the transaction in the early stage of the documentation of the transaction and protecting themselves by adopting well-thought-out strategies to eliminate or at least minimise those risks. Roger McCormick (2007) defines legal risk as chiefly referring to the risk of loss when the document evidencing the transaction subsequently turns out not having the identical legal effect as the parties intended it to be or when either or both parties institute adverse claims. Moreover, ensuring protection against legal risk is uncontrollable considering that most of this type of risk, such as credit risk, currency rate, and interest risk, is volatile as well as usually brought on by the parties themselves. 1 The legal aspect of international finance is concerned with the assessment and identification of these legal risks, quantifying them and developing strategies that would completely eliminate and if not, at least minimise them. dishearten 1 happen in International Finance 2 In assessing the risk of lending to an entity with cross-border operations, the first step is to identify the risks that such entity is involved. Table 1 summarises the general risks entailed in conducting international financial transactions. These risks atomic number 18 categorized into firm-specific risks, country-specific risks, and global-specific risks. Firm-specific risks refer to the risk of loss resulting from the companys structure as an operating argument and country-specific risks are those endemic in a particular country because of its political, social, and legal structures. Global-specific risks, on the other hand, are those tha t are attached to forces operating on a global scale that may interrupt business operations such as terrorism. 3 The roles of these risks in the legal aspect of international finance are their general potential to cause business disruption and subsequent losses to business operations that may alter contractual terms between parties who had antecedently entered into a contract of loan to finance a business operation in a territory outside of the state of the lender. In the example of the Oceania International and Lehman Wrecker proposed transaction, the risk of lending to the former by the latter can be first assessed by looking into the risks covered by Fig. 1. The loss or losses that Oceania International capacity incur if any of the risks enumerated therein materializes will necessarily affect the agreement between the two considering the possibility that Oceania International might not be able to meet its obligation of paying its loan. Of all the risks that a lender faces when l ending money to an entity conducting business operations outside of the lenders state country risk is the most significant. Country risk has become so important in the conduct of international finance that correspond to Hoti and McAleer (2002), various country risk rating agencies, such as the Economist Intelligence Unit, Euromoney, Institutional Investor, International Country Risk Guide, Moodys, Political Risk Services and Standard and Poors, have recently surfaced.