Find out more on how Western multinational corporations perceive and handle dangers in the Middle East.
In spite of the political instability and unfavourable fiscal conditions in certain parts of the Middle East, foreign direct investment (FDI) in the area and, particularly, within the Arabian Gulf has been steadily increasing in the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the associated risk appears to be essential. Yet, research on the risk perception of multinationals in the region is lacking in volume and quality, as experts and solicitors like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical research reports have examined the effect of risk on FDI, most analyses have largely been on political risk. Nonetheless, a fresh focus has appeared in current research, shining a limelight on an often-disregarded aspect namely cultural factors. In these groundbreaking studies, the writers remarked that businesses and their management often seriously disregard the effect of social facets as a result of not enough knowledge regarding social factors. In reality, some empirical research reports have unearthed that cultural differences lower the performance of multinational enterprises.
This social dimension of risk management calls for a shift in how MNCs operate. Adjusting to local customs 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 influence company practices and worker conduct. In GCC countries, successful company relationships are designed on trust and individual connections instead of just being transactional. Additionally, MNEs can reap the benefits of adjusting their human resource administration to reflect the cultural profiles of local employees, as variables affecting employee motivation and job satisfaction differ widely across countries. This involves a change in mindset and strategy from developing robust financial risk management tools to investing in cultural intelligence and local expertise as consultants and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.
Much of the existing 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 centered on the management of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the danger factors for which hedging or insurance coverage instruments could be developed to mitigate or move a company's risk exposure. However, present research reports have brought some fresh and interesting insights. They have sought to fill area of the research gaps by providing empirical knowledge about the risk perception of Western multinational corporations and their management strategies on the company level in the Middle East. In one investigation after collecting and analysing information from 49 major worldwide companies that are have extensive operations in the GCC countries, the authors discovered the following. Firstly, the risk related to foreign investments is actually more multifaceted than the usually cited factors of political risk and exchange rate exposure. Cultural danger is perceived as more important than political risk, monetary risk, and economic danger. Secondly, even though elements of Arab culture are reported to really have a strong influence on the business environment, most firms struggle to adapt to regional routines and customs.