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, particularly the Gulf region. Find out more about risk management within the gulf.

Much of the prevailing literature on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are hard to quantify. Indeed, plenty of research within the international administration field has focused on the management of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the risk variables for which hedging or insurance instruments could be developed to mitigate or move a firm's danger visibility. Nonetheless, recent studies have brought some fresh and interesting insights. They have sought to fill the main research gaps by providing empirical information about the risk perception of Western multinational corporations and their management strategies at the company level in the Middle East. In one investigation after gathering and analysing information from 49 major worldwide businesses which are active in the GCC countries, the authors found the following. Firstly, the risk related to foreign investments is clearly more multifaceted compared to the frequently cited factors of political risk and exchange rate exposure. Cultural danger is perceived as more crucial than political risk, economic danger, and financial danger. Secondly, despite the fact that aspects of Arab culture are reported to have a strong impact on the business environment, most firms battle to adapt to regional routines and customs.

Despite the political uncertainty and unfavourable economic climates in some parts of the Middle East, international direct investment (FDI) in the area and, specially, into the Arabian Gulf has been steadily increasing over the past two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the connected risk is apparently essential. Yet, research regarding the risk perception of multinationals in the area is lacking in amount and quality, as experts and solicitors like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical studies have investigated the effect of risk on FDI, many analyses have been on political risk. However, a new focus has emerged in recent research, shining a limelight on an often-neglected aspect specifically cultural variables. In these revolutionary studies, the writers noticed that businesses and their management frequently seriously underestimate the impact of cultural facets as a result of lack of knowledge regarding social factors. In reality, some empirical research reports have discovered that cultural differences lower the performance of international enterprises.

This cultural dimension of risk management calls for a change in how MNCs work. Adjusting to local traditions is not only about being familiar with business etiquette; it also requires much deeper cultural integration, such as appreciating local values, decision-making designs, and the societal norms that affect company practices and employee behaviour. In GCC countries, successful company relationships are designed on trust and personal connections rather than just being transactional. Moreover, MNEs can benefit from adjusting their human resource administration to reflect the cultural profiles of regional workers, as factors influencing employee motivation and job satisfaction differ widely across cultures. This calls for a change in mindset and strategy from developing robust financial risk management tools to investing in cultural intelligence and local expertise as specialists and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.