Speaking about the risk perception of MNCs into the Middle East

Speaking about the risk perception of MNCs into the Middle East

Blog Article

The Middle East is attracting global investment, especially the Gulf area. Discover more about risk management within the gulf.

This cultural dimension of risk management requires a change in how MNCs run. Adapting to regional customs is not just about being familiar with business etiquette; it also involves much deeper social integration, such as for example understanding local values, decision-making styles, and the societal norms that affect company practices and worker behaviour. In GCC countries, successful business relationships are made on trust and individual connections instead of just being transactional. Furthermore, MNEs can take advantage of adapting their human resource administration to mirror the social profiles of local employees, as variables affecting employee motivation and job satisfaction differ widely across cultures. This requires a shift in mind-set and strategy from developing robust monetary risk management tools to investing in cultural intelligence and regional expertise as specialists and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest.

In spite of the political uncertainty and unfavourable economic conditions in some areas of the Middle East, foreign direct investment (FDI) in the region and, especially, into the Arabian Gulf has been considerably increasing over the past two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the associated risk appears to be crucial. Yet, research regarding the risk perception of multinationals in the area is lacking in amount and quality, as professionals and solicitors like Louise Flanagan in Ras Al Khaimah would probably attest. Although different empirical research reports have examined the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a fresh focus has materialised in present research, shining a limelight on an often-neglected aspect specifically cultural variables. In these groundbreaking studies, the writers noticed that companies and their management usually really brush aside the effect of cultural factors because of a not enough knowledge regarding social factors. In fact, some empirical studies have found that cultural differences lower the performance of international enterprises.

A lot of the present literature on risk management strategies for multinational corporations features particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, plenty of research in the international administration field has been dedicated to the handling of either political risk or foreign exchange uncertainties. Finance and insurance literature emphasises the danger variables for which hedging or insurance instruments are developed to mitigate or move a firm's danger visibility. Nevertheless, recent research reports have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by providing empirical knowledge about the risk perception of Western multinational corporations and their administration methods at the firm level within the Middle East. In one investigation after gathering and analysing information from 49 major international businesses which are active in the GCC countries, the authors discovered the following. Firstly, the risk related to foreign investments is obviously much more multifaceted compared to the often examined variables of political risk and exchange rate exposure. Cultural danger is perceived as more important than political risk, economic risk, and financial risk. Secondly, despite the fact that elements of Arab culture are reported to have a strong impact on the business environment, most firms struggle to adapt to regional routines and customs.