Find out more about how precisely Western multinational corporations perceive and manage dangers within the Middle East.
This social dimension of risk management requires a shift in how MNCs do business. Adapting to local traditions is not just about understanding company etiquette; it also involves much deeper cultural integration, such as for example appreciating regional values, decision-making styles, and the societal norms that influence company practices and employee conduct. In GCC countries, successful business relationships are designed on trust and personal connections rather than just being transactional. Also, MNEs can benefit from adjusting their human resource management to mirror the cultural profiles of regional employees, as variables influencing employee motivation and job satisfaction vary widely across countries. This involves a shift in mind-set and strategy from developing robust financial risk management tools to investing in social intelligence and local expertise as professionals and lawyers 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 features particular uncertainties but omits uncertainties that are tough to quantify. Indeed, lots of research in the international administration field has focused on the handling of either political risk or foreign exchange uncertainties. Finance and insurance literature emphasises the danger factors which is why hedging or insurance instruments could be developed to mitigate or move a firm's risk visibility. However, current studies have brought some fresh and interesting insights. They have sought to fill the main research gaps by giving empirical knowledge about the risk perception of Western multinational corporations and their administration methods at the firm level within the Middle East. In one research after collecting and analysing data from 49 major worldwide businesses that are active in the GCC countries, the authors discovered the following. Firstly, the risk associated with foreign investments is actually even more multifaceted than the frequently analyzed variables of political risk and exchange rate visibility. Cultural risk is perceived as more crucial than political risk, monetary danger, and economic risk. Secondly, despite the fact that elements of Arab culture are reported to have a strong influence on the business environment, most firms find it difficult to adapt to regional routines and customs.
Despite the political instability and unfavourable fiscal conditions in certain elements of the Middle East, foreign direct investment (FDI) in the region and, especially, into the Arabian Gulf has been steadily increasing in the last 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 region is limited in amount and quality, as professionals 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, most analyses have been on political risk. Nevertheless, a brand new focus has come forth in present research, shining a limelight on an often-disregarded aspect namely cultural factors. In these pioneering studies, the authors noticed that companies and their management frequently seriously neglect the impact of cultural factors due to a not enough knowledge regarding social factors. In reality, some empirical research reports have discovered that cultural differences lower the performance of multinational enterprises.