Find out more about how exactly Western multinational corporations perceive and handle dangers in the Middle East.
Regardless of the political uncertainty and unfavourable economic conditions in a few areas of the Middle East, international direct investment (FDI) in the area and, particularly, within the Arabian Gulf has been steadily increasing over the past two decades. The relevance of the Middle East and Gulf areas is growing for FDI, and the linked risk is apparently essential. Yet, research regarding the risk perception of multinationals in the region is limited in amount and quality, as specialists and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical studies have examined the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a new focus has surfaced in current research, shining a limelight on an often-neglected aspect particularly cultural facets. In these revolutionary studies, the authors pointed out that companies and their management often seriously disregard the effect of social facets due to a not enough knowledge regarding social factors. In reality, some empirical research reports have discovered that cultural differences lower the performance of international enterprises.
This social dimension of risk management requires a change in how MNCs function. Adapting to regional traditions is not just about understanding business etiquette; it also involves much deeper cultural integration, such as appreciating local values, decision-making styles, and the societal norms that affect company practices and worker conduct. In GCC countries, successful company relationships are made on trust and personal connections rather than just being transactional. Moreover, MNEs can take advantage of adjusting their human resource management to mirror the social profiles of regional workers, as factors influencing employee motivation and job satisfaction vary widely across cultures. This requires a change in mind-set and strategy from developing robust monetary risk management tools to investing in social intelligence and local expertise as experts and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.
A lot of the prevailing academic work on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are tough to quantify. Certainly, plenty of research within the international management field has focused on the handling of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the risk variables which is why hedging or insurance coverage instruments could be developed to mitigate or transfer a company's danger visibility. Nevertheless, recent studies have brought some fresh and interesting insights. They have sought to fill the main research gaps by providing empirical understanding of the risk perception of Western multinational corporations and their administration techniques on the company level in the Middle East. In one research 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 associated with foreign investments is clearly a lot more multifaceted compared to frequently cited factors of political risk and exchange rate exposure. Cultural danger is perceived as more essential than political risk, economic risk, 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 find it difficult to adapt to regional routines and customs.