Talking about the risk perception of MNCs within the Middle East

Talking about the risk perception of MNCs within the Middle East

Blog Article

The Middle East is attracting global investment, especially the Gulf region. Find out more about risk management in the gulf.

Regardless of the political instability and unfavourable fiscal conditions in a few elements 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 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 investigated the effect of risk on FDI, most analyses have been on political risk. Nevertheless, a fresh focus has emerged in recent research, shining a limelight on an often-disregarded aspect particularly cultural facets. In these revolutionary studies, the researchers noticed that businesses and their management frequently seriously disregard the effect of cultural factors because of a lack of knowledge regarding social factors. In reality, some empirical studies have found that cultural differences lower the performance of multinational enterprises.

This social dimension of risk management demands a change in how MNCs work. Adapting to local customs is not only about being familiar with business etiquette; it also involves much deeper cultural integration, such as for example understanding local values, decision-making styles, and the societal norms that affect company 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 adapting their human resource management to mirror the cultural profiles of regional workers, as variables influencing employee motivation and job satisfaction vary widely across countries. This calls for a shift in mindset and strategy from developing robust financial risk management tools to investing in social intelligence and local expertise as consultants and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

Much of the prevailing academic work on risk management strategies for multinational corporations demonstrates particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, lots of research in the worldwide management field has focused 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 instruments can be developed to mitigate or move a firm's danger exposure. But, current studies have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by giving empirical knowledge about the risk perception of Western multinational corporations and their administration techniques on the company level in the Middle East. In one research after collecting and analysing information from 49 major international businesses that are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk connected with foreign investments is actually far more multifaceted compared to the usually analyzed factors of political risk and exchange rate visibility. Cultural danger is perceived as more crucial than political risk, financial danger, and economic danger. Secondly, even though elements of Arab culture are reported to really have a strong influence on the business environment, most firms battle to adapt to local routines and traditions.