Talking about the risk perception of MNCs within the Middle East

Talking about the risk perception of MNCs within the Middle East

Blog Article

Studies suggest that the prosperity of multinational corporations within the Middle East hinges not merely on economic acumen, but additionally on understanding and integrating into local cultures.

Regardless of the political uncertainty and unfavourable fiscal conditions in some areas of the Middle East, international direct investment (FDI) in the region and, especially, in the Arabian Gulf has been progressively increasing over the past two decades. The relevance of the Middle East and Gulf areas is growing for FDI, and the associated risk is apparently important. Yet, research regarding the risk perception of multinationals in the area is limited in volume and quality, as consultants and attorneys like Louise Flanagan in Ras Al Khaimah would probably attest. Although different empirical studies have investigated the effect of risk on FDI, most analyses have largely been on political risk. Nonetheless, a fresh focus has materialised in recent research, shining a spotlight on an often-neglected aspect particularly cultural facets. In these pioneering studies, the authors pointed out that companies and their management frequently really underestimate the impact of cultural factors due to a not enough knowledge regarding social factors. In fact, some empirical studies have discovered that cultural differences lower the performance of international enterprises.

This social dimension of risk management demands a change in how MNCs do business. Conforming to regional traditions is not only about being familiar with company etiquette; it also requires much deeper social integration, such as for example appreciating local values, decision-making styles, and the societal norms that influence business practices and employee behaviour. In GCC countries, successful business relationships are made on trust and individual connections instead of just being transactional. Also, MNEs can reap the benefits of adjusting their human resource management to reflect the cultural profiles of local employees, as variables affecting employee motivation and job satisfaction differ widely across countries. This calls for a change in mind-set and strategy from developing robust economic risk management tools to investing in social intelligence and local expertise as professionals and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest.

A lot of the present academic work on risk management strategies for multinational corporations emphasises particular uncertainties but omits uncertainties that are tough to quantify. Indeed, plenty of research within the worldwide management field has been dedicated to the handling of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the danger factors for which hedging or insurance coverage instruments could be developed to mitigate or move a firm's risk visibility. But, current studies have brought some fresh and interesting insights. They have sought to fill part of the research gaps by giving empirical understanding of the risk perception of Western multinational corporations and their management strategies at the firm level within the Middle East. In one research after collecting and analysing information from 49 major worldwide companies which are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk associated with foreign investments is actually more multifaceted than the frequently examined variables of political risk and exchange rate exposure. Cultural danger is regarded as more important than political risk, financial danger, and economic risk. Secondly, despite the fact that elements of Arab culture are reported to have a strong impact on the business environment, most firms find it difficult to adapt to local routines and traditions.