A typical International Joint Venture is between: 1. Two international parties, (individuals or companies), incorporate a company.

Business of one party is transferred to the company and as consideration for such transfer, shares are issued by the company and subscribed by that party. The other party subscribes for the shares in cash. 2. The above two parties subscribe to the shares of the joint venture company in agreed proportion, in cash, and start a new business. 3. Promoter shareholder of an existing company and a third party, who/which may be individual/company, one of them non-resident or both residents, collaborate to jointly carry on the business of that company and its shares are taken by the said third party through payment in cash. Some practical aspects of formation of international joint venture companies and the prerequisites which the parties should take into account are enumerated herein after.
In some countries joint ventures are a separate legal entity, whereas in others they cold any of the available corporate entities.

How to Enter into a Joint Venture Agreement? Selection of a good local partner is the key to the success of any joint venture. Once a partner is selected generally a Memorandum of Understanding or a Letter of Intentis signed by the parties highlighting the basis of the future joint venture agreement. A Memorandum of Understanding and a Joint Venture Agreement must be signed after consulting lawyers well versed in international laws and multi-jurisdictional laws and procedures. Before signing the joint venture agreement, the terms should be thoroughly discussed and negotiated to avoid any misunderstanding at a later stage. Negotiations require an understanding of the cultural and legal background of the parties.

Before signing a Joint Venture Agreement the following must be properly addressed:
y y y y y y y y y y y y y y y y y y y y

Dispute resolution agreements Applicable law Force Majeure Holding shares Transfer of shares Board of Directors General meeting CEO/MD Management Committee Important decisions with consent of partners Dividend policy Funding Access. Change of control Non-Compete Confidentiality Indemnity Assignment. Break of deadlock Termination

The Joint Venture agreement should be subject to obtaining all necessary governmental approvals and licenses within specified period.

International financial markets face a variety of risks and they are collectively known as international finance risks. The premier financial institutions of the world apply various principles and practical applications to deal with the risks of international finance. Financial risks usually are those kind of risks which are related to finance or money. The financial risks related to investments include capital risk, currency risk, as well as liquidity risk. The debt related risks include interest rate risk and credit risk. The international insurance industry also faces a number of risks. The various risks that influence international financial markets usually include the following:

y y y y

Political risk Financial risk Economic risk Country risk

y y y y y y

Market risk Exchange rate risk Operational risk Legal risk Hedging risk Systemic risk

These types of risk can influence the decision making procedures involved in portfolio investment, foreign direct investment (FDI), and bank credit. Financial risk management plays a pivotal role in the management of international finance risks. International finance risk management offers risk assessment services which are beneficial for the following:

y y y y y y y y

Foreign direct investment Multinationals Rating agencies Investment managers, such as mutual funds, etc. Insurance companies Banks Bank loans Portfolio investment

The international financial market has experienced a significant shift in the 1980s and 1990s. The international financial transactions have become more complicated and rapid and as a result of this, the international financial markets are facing greater uncertainties. Currently, the financial services industry has become much more aggressive and the international market participants are getting the exposure to increased financial risks than earlier. The reasons behind this are:

y y y y y

The globalization of financial markets The unpredictability or volatility of the international financial markets The complex structure of the new types of investments The increase in the global supply of loanable funds The intense international market competition, which is increasing day by day

Hence, it is absolutely necessary that the financial risks are properly measured and preventive actions for efficient management of international financial risks are applied. For maintaining the stability of both international financial market and domestic financial market, the performance of efficient risk management by banks and financial institutions is crucial. Supply of accurate and reliable information on international financial markets is important for the market participants because with help of dependable information, they are able to make knowledgeable investment decisions.

Hedging

Hedging is the process of managing the risk of price changes in physical material by offsetting that risk in the futures market. Hedging can vary in complexity from a

relatively simple activity, through to a highly complex strategies, including the use of options. The ability to hedge means that industry can decide on the amount of risk it is prepared to accept. It may wish to eliminate the risk entirely and can generally do so quickly and easily using the LME. Managing price risk means achieving greater control of either the cost of inputs, or revenues from sales, or both; planning for the future based on assured costs and revenues; and eliminating concerns that a sharply adverse move in the price of material could turn an otherwise flourishing and efficient business into a loss maker. Hedging by trade and industry is the opposite of speculation and is undertaken in order to eliminate an existing physical price risk, by taking a compensating position in the futures market. Speculators come to the futures market with no initial risk. They assume risk by taking futures positions. Hedgers reduce or eliminate the chance of further losses or profits, while the speculators risk losses in order to make profits. Before starting a hedging programme it is essential to assess the risk due to exposure to the price of physical material. Once the hedger has an understanding of the tools available at the LME, it is relatively easy to select the appropriate action to manage this risk. It is important that this action is properly managed at all times and that the appropriate controls and approval procedures are in place. It is generally advisable to work with an LME broker so that expert advice can be taken in devising a hedging programme.