Discussing the risk perception of MNCs in the Middle East

Discussing the risk perception of MNCs in the Middle East

Blog Article

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

This cultural dimension of risk management demands a change in how MNCs operate. Adapting to regional traditions is not only about being familiar with company etiquette; it also requires much deeper social integration, such as for example understanding regional values, decision-making designs, and the societal norms that affect company practices and worker conduct. In GCC countries, successful company relationships are designed on trust and individual connections instead of just being transactional. Additionally, MNEs can benefit from adjusting their human resource management to mirror the cultural profiles of local workers, as variables affecting employee motivation and job satisfaction differ widely across countries. This involves a change in mindset and strategy from developing robust economic risk management tools to investing in cultural intelligence and local expertise as experts and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

Despite the political instability and unfavourable economic climates in some elements of the Middle East, international direct investment (FDI) in the area and, especially, within the Arabian Gulf has been continuously increasing over the past two decades. 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 area is lacking in amount and quality, as experts and lawyers 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 been on political risk. Nevertheless, a new focus has materialised in recent research, shining a spotlight on an often-disregarded aspect particularly cultural variables. In these pioneering studies, the researchers noticed that companies and their management usually seriously neglect the impact of social factors as a result of not enough knowledge regarding cultural factors. In reality, some empirical studies have unearthed that cultural differences lower the performance of international enterprises.

Much of the prevailing academic work on risk management strategies for multinational corporations demonstrates particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, a lot of research in the worldwide management field has focused on the handling of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the danger factors which is why hedging or insurance instruments are developed to mitigate or transfer a company's danger exposure. Nonetheless, recent 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 administration strategies on the firm level within the Middle East. In one research after collecting and analysing information from 49 major international businesses which are active in the GCC countries, the authors discovered the following. Firstly, the risk related to foreign investments is obviously a great deal more multifaceted than the usually analyzed factors of political risk and exchange rate exposure. Cultural danger is perceived as more crucial than political risk, monetary risk, and economic danger. Secondly, even though aspects of Arab culture are reported to really have a strong influence on the business environment, most firms find it difficult to adapt to regional routines and customs.