The Middle East is attracting global investment, particularly the Gulf region. Discover more about risk management within the gulf.
In spite of the political instability and unfavourable fiscal conditions in certain parts of the Middle East, international direct investment (FDI) in the area and, particularly, in the Arabian Gulf has been progressively increasing over the past two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the connected risk is apparently important. Yet, research on the risk perception of multinationals in the region is limited in amount and quality, as professionals and attorneys like Louise Flanagan in Ras Al Khaimah may likely attest. Although different empirical research reports have examined the effect of risk on FDI, most analyses have been on political risk. However, a brand new focus has materialised in present research, shining a limelight on an often-disregarded aspect particularly cultural facets. In these pioneering studies, the authors pointed out that companies and their administration usually really disregard the impact of cultural factors because of a lack of knowledge regarding social factors. In reality, some empirical research reports have unearthed that cultural differences lower the performance of international enterprises.
This social dimension of risk management requires a shift in how MNCs function. Conforming to regional traditions is not just about being familiar with business etiquette; it also involves much deeper cultural integration, such as understanding local values, decision-making styles, and the societal norms that affect business practices and worker behaviour. In GCC countries, successful business relationships are made on trust and personal connections rather than just being transactional. Furthermore, MNEs can reap the benefits of adapting their human resource management to reflect the cultural profiles of regional workers, as variables affecting employee motivation and job satisfaction differ widely across cultures. This requires a change in mind-set and strategy from developing robust economic risk management tools to investing in cultural intelligence and local expertise as experts and lawyers 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 international administration field has focused on the management of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the danger variables which is why hedging or insurance instruments can be developed to mitigate or move a company's danger visibility. But, present studies have brought some fresh and interesting insights. They have sought to fill the main research gaps by providing empirical information about the risk perception of Western multinational corporations and their administration strategies on the company level within the Middle East. In one research after collecting and analysing data from 49 major worldwide companies which are have extensive operations in the GCC countries, the authors discovered the following. Firstly, the risk connected with foreign investments is actually far more multifaceted compared to usually analyzed factors of political risk and exchange rate visibility. Cultural risk is regarded as more important than political risk, monetary risk, and financial risk. Secondly, despite the fact that elements of Arab culture are reported to really have a strong impact on the business environment, most firms battle to adapt to local routines and traditions.