These practices for reducing the exchange risk use the theory of keeping the reference exchange rate initially at the selling and buying the products and services by the Company A. When Company A will make any kind of future transactions it will fix the exchange rates to avoid any risk which is basically based on the company’s sensitivities and other benchmarking priorities. Company A have to decide the budget rate in the beginning itself and have to make sure that the deviation that will occur in future will not be much. Company A’s investing industry in India have to make sure that the Company A’s corporate treasury have done the futuristic analysis in regard of that by keeping view the India’s economictrend for next few years.
Law and Order: This is also an important risk that company has to face sometime because of not following the law and order decided in the particular sector or area.
Ethnic Tensions: The ethnic environment may also responsible for different political risks.
Democratic Accountability: If the company likes Company A gets the democratic support will be in advantage otherwise will be a problem for the company.
Bureaucracy Quality: If the bureaucrats of the concern country are not of quality then company have to be in loss at different places and may not operate perfectly.
Ways to reduce the political risks
There are no straight forward rules to avoid the political risks in India. For reducing the risks the most important thing that Company A should follow is that it should not violates any rule and should operate under the government rules and regulations keeping in mid the social and economic development of the local area and concern country.