The Middle East is attracting global investment, particularly the Gulf area. Discover more about risk management within the gulf.
This cultural dimension of risk management demands a shift in how MNCs operate. Conforming to local traditions is not just about being familiar with company etiquette; it also involves much deeper social integration, such as understanding local values, decision-making designs, and the societal norms that influence company practices and employee conduct. In GCC countries, successful business relationships are designed on trust and personal connections instead of just being transactional. Moreover, MNEs can reap the benefits of adapting their human resource administration to reflect the social profiles of local workers, as factors affecting employee motivation and job satisfaction vary widely across cultures. This involves a shift in mind-set and strategy from developing robust financial risk management tools to investing in social intelligence and local expertise as specialists and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.
Much of the present literature on risk management strategies for multinational corporations illustrates particular uncertainties but omits uncertainties that are difficult to quantify. Indeed, plenty of research in the worldwide management field has centered on the handling of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the danger factors which is why hedging or insurance coverage instruments could be developed to mitigate or move a company's risk visibility. But, current research reports have brought some fresh and interesting insights. They have sought to fill part of the research gaps by providing empirical information about the risk perception of Western multinational corporations and their management techniques on the company level in the Middle East. In one investigation after gathering and analysing information from 49 major international companies which are active in the GCC countries, the authors found the following. Firstly, the risk related to foreign investments is clearly far more multifaceted compared to usually examined factors of political risk and exchange rate visibility. Cultural danger is regarded as more important than political risk, financial risk, and financial danger. Secondly, even though aspects of Arab culture are reported to have a strong influence on the business environment, most firms battle to adapt to regional routines and traditions.
Despite the political instability and unfavourable fiscal conditions in certain elements of the Middle East, foreign direct investment (FDI) in the region and, especially, within the Arabian Gulf has been progressively increasing within the last 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 volume and quality, as specialists and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical studies have investigated the effect of risk on FDI, most analyses have been on political risk. However, a brand new focus has come forth in present research, shining a limelight on an often-disregarded aspect namely cultural factors. In these pioneering studies, the authors pointed out that companies and their management often seriously take too lightly the impact of cultural factors as a result of not enough knowledge regarding social factors. In reality, some empirical research reports have discovered that cultural differences lower the performance of international enterprises.