Final answer:
To protect against foreign exchange rate risks, a company can engage in hedging, which involves a financial contract that guarantees a specific exchange rate at a future date.
Step-by-step explanation:
A company can mitigate the risks associated with fluctuations in foreign exchange rates primarily through 'hedging.' This process involves securing a financial contract that guarantees a specific exchange rate at a future date, regardless of market conditions. If the domestic value of the foreign currency decreases, the company is safeguarded by the hedge. While there are other methods mentioned, such as balancing payments or trading in the spot market, these are not direct ways to deal with exchange rate fluctuations in the context given. Hedging provides certainty and protects the company's financial interests against potential adverse movements in exchange rates.