Companies that operate in foreign countries tend to face foreign exchange risks, political risks, and country risks. The foreign exchange risk occurs when fluctuations related to the domestic appreciation of the company's domestic currency relative to a foreign currency, leading to reduced profits. These fluctuations of currencies cause the value of foreign investments to fluctuate. Secondly, political risks occur when foreign countries institute's unexpected policies such as trade barriers that might affect the company negatively. Political instability might also hinder the operations of foreign companies. Thirdly, Country risk occurs when the foreign country experiences poor economic conditions, poor infrastructure, insecurity issues, and unskilled labor, thus hindering the company's effective operations.