The objective of foreign exchange rate protection is to anticipate and influence the effect of unexpected changes in foreign exchange rates on a firm's future cash flows. One goal of foreign exchange rate protection is to minimize foreign exchange rate management costs. A forward contract is an example of a balance sheet hedge. Varying the leasing currency is an example of an operational hedge. If the expected Loss from not hedging is greater than the cost of forward cover, the firm should hedge. One reason that multinational firms make foreign direct investments is to acquire access to raw materials. One reason for market segmentation is differences in GAAP in different countries. Information asymmetry is on reason for increased risk for multinational investments. Differences in capital structure for companies in different countries is one reason that companies in different countries may have different costs of capital. Political risk results from changes in the economic and financial environment that may reduce the overall value of the firm's business activities. One way to avoid political risk is the avoid making investments overseas