Talking about the risk perception of MNCs in the Middle East

Talking about the risk perception of MNCs in the Middle East

Blog Article

According to present research, a significant challenge for firms in the GCC is adjusting to regional customs and business practices. Learn more about this here.

This cultural dimension of risk management requires a change in how MNCs run. Adapting to regional customs is not only about being familiar with business etiquette; it also involves much deeper social integration, such as for example appreciating local values, decision-making designs, and the societal norms that influence business practices and worker conduct. In GCC countries, successful company relationships are built on trust and personal connections instead of just being transactional. Additionally, MNEs can benefit from adapting their human resource management to mirror the social profiles of regional employees, as factors affecting employee motivation and job satisfaction differ widely across countries. This requires a shift in mind-set and strategy from developing robust monetary risk management tools to investing in social intelligence and local expertise as experts and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

Despite the political instability and unfavourable fiscal conditions in certain elements of the Middle East, international direct investment (FDI) in the area and, particularly, in the Arabian Gulf has been continuously increasing within the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the linked risk is apparently important. Yet, research on the risk perception of multinationals in the region is lacking in quantity and quality, as consultants and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical research reports have examined the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a fresh focus has materialised in present research, shining a limelight on an often-disregarded aspect particularly cultural facets. In these revolutionary studies, the researchers noticed that companies and their management often seriously take too lightly the impact of cultural facets as a result of not enough knowledge regarding cultural variables. In fact, some empirical studies have found that cultural differences lower the performance of international enterprises.

A lot of the prevailing academic work on risk management strategies for multinational corporations emphasises particular uncertainties but omits uncertainties that are hard to quantify. Certainly, plenty of research within the worldwide administration 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 instruments can be developed to mitigate or move a company's risk exposure. Nevertheless, recent studies have brought some fresh and interesting insights. They have sought to fill the main research gaps by providing empirical knowledge about the risk perception of Western multinational corporations and their administration methods on the firm level within the Middle East. In one research after collecting and analysing data from 49 major worldwide companies that are active in the GCC countries, the authors discovered the following. Firstly, the risk related to foreign investments is obviously much more multifaceted compared to the often cited variables of political risk and exchange rate visibility. Cultural risk is regarded as more essential than political risk, financial danger, and economic danger. Secondly, even though aspects 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.