Discussing the risk perception of MNCs in the Middle East

Discussing the risk perception of MNCs in the Middle East

Blog Article

Find out more about how exactly Western multinational corporations perceive and handle dangers in the Middle East.

In spite of the political uncertainty and unfavourable economic climates in some elements of the Middle East, foreign direct investment (FDI) in the area and, specially, in the Arabian Gulf has been gradually increasing in the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the connected risk is apparently essential. Yet, research regarding the risk perception of multinationals in the area is lacking in volume and quality, as consultants and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical studies have investigated the effect of risk on FDI, most analyses have been on political risk. However, a fresh focus has emerged in recent research, shining a limelight on an often-ignored aspect specifically cultural facets. In these revolutionary studies, the authors pointed out that businesses and their administration often seriously underestimate the impact of cultural facets because of a lack of knowledge regarding cultural variables. In fact, some empirical research reports have unearthed that cultural differences lower the performance of international enterprises.

This social dimension of risk management demands a change in how MNCs function. Adapting to local customs is not just about understanding company etiquette; it also involves much deeper cultural integration, such as for example appreciating local values, decision-making designs, and the societal norms that affect business practices and employee conduct. In GCC countries, successful company relationships are made on trust and personal connections instead of just being transactional. Additionally, MNEs can benefit from adjusting their human resource administration to reflect the social profiles of local employees, as variables influencing employee motivation and job satisfaction vary widely across countries. This requires a shift in mind-set and strategy from developing robust economic risk management tools to investing in cultural intelligence and regional expertise as experts and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

A lot of the existing academic work on risk management strategies for multinational corporations illustrates particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, lots of research within the international administration field has centered on the handling of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the risk variables which is why hedging or insurance instruments could be developed to mitigate or transfer a company's risk exposure. However, current research reports have brought some fresh and interesting insights. They have sought to fill area of the research gaps by providing empirical information about the risk perception of Western multinational corporations and their management techniques on the firm level within the Middle East. In one investigation 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 related to foreign investments is obviously even more multifaceted than the often examined factors of political risk and exchange rate visibility. Cultural risk is perceived as more essential than political risk, financial risk, and financial risk. Secondly, even though elements of Arab culture are reported to have a strong influence on the business environment, most firms battle to adapt to local routines and customs.