Speaking about the risk perception of MNCs into the Middle East

Speaking about the risk perception of MNCs into the Middle East

Blog Article

According to current research, an important challenge for firms in the GCC is adapting to local customs and business practices. Discover more about this right here.

Much of the existing literature on risk management strategies for multinational corporations emphasises particular uncertainties but omits uncertainties that are tough to quantify. Certainly, plenty of research within the worldwide administration field has focused on the management of either political risk or foreign exchange uncertainties. Finance and insurance literature emphasises the danger factors which is why hedging or insurance coverage instruments could be developed to mitigate or transfer a company's risk exposure. But, current studies 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 administration techniques at the firm level in the Middle East. In one research after collecting and analysing data from 49 major worldwide companies that are have extensive operations in the GCC countries, the authors discovered the following. Firstly, the risk connected with foreign investments is clearly even more multifaceted compared to frequently cited factors of political risk and exchange rate exposure. Cultural danger is regarded as more essential than political risk, financial risk, and financial danger. Secondly, despite the fact that aspects of Arab culture are reported to have a strong influence on the business environment, most firms find it difficult to adapt to local routines and traditions.

This cultural dimension of risk management requires a change in how MNCs run. Adapting to local traditions is not just about understanding business etiquette; it also requires much deeper cultural integration, such as for instance appreciating regional values, decision-making styles, and the societal norms that affect business practices and worker behaviour. In GCC countries, successful company relationships are made on trust and individual connections rather than just being transactional. Furthermore, MNEs can take advantage of adapting their human resource management to reflect the social profiles of local workers, as factors affecting employee motivation and job satisfaction vary widely across countries. This requires a change in mind-set and strategy from developing robust economic risk management tools to investing in social intelligence and local expertise as specialists and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

Despite the political instability and unfavourable economic climates in a few elements 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 markets is growing for FDI, and the linked risk seems to be essential. Yet, research on the risk perception of multinationals in the region is lacking in quantity and quality, as experts and solicitors like Louise Flanagan in Ras Al Khaimah may likely attest. Although different empirical studies have investigated the effect of risk on FDI, many analyses have largely been on political risk. However, a fresh focus has surfaced in present research, shining a spotlight on an often-ignored aspect particularly cultural factors. In these revolutionary studies, the authors noticed that businesses and their administration often really neglect the impact of cultural facets because of a lack of knowledge regarding social variables. In reality, some empirical research reports have found that cultural differences lower the performance of international enterprises.