The Middle East is attracting global investment, especially the Gulf region. Find out more about risk management within the gulf.
Regardless of the political uncertainty and unfavourable economic climates in some areas of the Middle East, foreign 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 connected risk appears to be essential. Yet, research regarding the risk perception of multinationals in the area is lacking in volume and quality, as specialists and solicitors like Louise Flanagan in Ras Al Khaimah would probably attest. Although different empirical research reports have examined the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a fresh focus has come forth in present research, shining a limelight on an often-disregarded aspect particularly cultural facets. In these revolutionary studies, the researchers remarked that businesses and their administration frequently seriously disregard the effect of social factors due to a not enough knowledge regarding social factors. In reality, some empirical studies have found that cultural differences lower the performance of multinational enterprises.
This cultural dimension of risk management demands a change in how MNCs function. Conforming to regional customs is not just about understanding business etiquette; it also involves much deeper social integration, such as for example understanding local values, decision-making styles, and the societal norms that influence company practices and worker behaviour. In GCC countries, successful business relationships are built on trust and individual connections instead of just being transactional. Also, MNEs can take advantage of adapting their human resource administration to mirror the cultural profiles of local workers, as variables influencing employee motivation and job satisfaction vary widely across countries. This calls for a change in mindset and strategy from developing robust financial risk management tools to investing in social intelligence and regional expertise as professionals and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.
Much of the existing literature on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, lots of research in the worldwide management field has been dedicated to the handling of either political risk or foreign currency exchange uncertainties. Finance and insurance coverage literature emphasises the risk factors which is why hedging or insurance coverage instruments can be developed to mitigate or transfer a company's risk exposure. But, present studies have brought some fresh and interesting insights. They have sought to fill part of the research gaps by providing empirical information about the risk perception of Western multinational corporations and their administration strategies on the firm level within the Middle East. In one research after gathering and analysing information from 49 major international companies that are have extensive operations in the GCC countries, the authors discovered the following. Firstly, the risk related to foreign investments is obviously far more multifaceted than the usually analyzed variables of political risk and exchange rate visibility. Cultural risk is regarded as more crucial than political risk, financial danger, and financial danger. Secondly, despite the fact that aspects 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.