The Middle East is attracting global investment, particularly the Gulf area. Learn more about risk management in the gulf.
This social dimension of risk management calls for a shift in how MNCs function. Adjusting to local customs is not only about being familiar with business etiquette; it also involves much deeper social integration, such as for example appreciating regional values, decision-making designs, and the societal norms that affect business practices and employee behaviour. In GCC countries, successful company relationships are designed on trust and individual connections rather than just being transactional. Moreover, MNEs can take advantage of adjusting their human resource management to reflect the cultural profiles of local employees, as variables affecting employee motivation and job satisfaction vary widely across cultures. This requires a shift in mindset and strategy from developing robust economic risk management tools to investing in social intelligence and regional expertise as consultants and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.
Despite the political instability and unfavourable fiscal conditions in a few parts of the Middle East, foreign 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 associated risk seems to be important. Yet, research on the risk perception of multinationals in the region is limited in quantity and quality, as experts and attorneys like Louise Flanagan in Ras Al Khaimah may likely attest. Although various empirical studies have examined the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a fresh focus has emerged in recent research, shining a spotlight on an often-ignored aspect specifically cultural variables. In these pioneering studies, the authors pointed out that businesses and their administration frequently really brush aside the effect of social factors because of a lack of knowledge regarding social factors. In reality, some empirical research reports have discovered that cultural differences lower the performance of multinational enterprises.
Much of the prevailing academic work on risk management strategies for multinational corporations illustrates particular uncertainties but omits uncertainties that are hard to quantify. Indeed, a lot of research in the worldwide administration field has centered on the management of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the danger variables which is why hedging or insurance instruments can be developed to mitigate or move a firm's danger exposure. Nonetheless, recent research reports have brought some fresh and interesting insights. They have sought to fill part of the research gaps by providing empirical understanding of the risk perception of Western multinational corporations and their management techniques on the firm level within the Middle East. In one research after collecting and analysing information from 49 major worldwide companies which are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk connected with foreign investments is actually more multifaceted than the usually analyzed factors of political risk and exchange rate visibility. Cultural risk is regarded as more crucial than political risk, financial danger, and financial risk. Secondly, despite the fact that aspects of Arab culture are reported to really have a strong impact on the business environment, most firms struggle to adapt to regional routines and customs.