Discussing the risk perception of MNCs into the Middle East

Discussing the risk perception of MNCs into the Middle East

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The Middle East is attracting global investment, especially the Gulf area. Discover more about risk management in the gulf.

This social dimension of risk management demands a change in how MNCs operate. Adapting to regional traditions is not just about being familiar with company etiquette; it also requires much deeper cultural integration, such as understanding local values, decision-making styles, and the societal norms that affect business practices and worker behaviour. In GCC countries, successful company relationships are made on trust and individual connections instead of just being transactional. Furthermore, MNEs can take advantage of adjusting their human resource administration to reflect the social profiles of regional employees, as variables influencing employee motivation and job satisfaction vary widely across cultures. This involves a shift in mindset and strategy from developing robust financial risk management tools to investing in social intelligence and local expertise as experts and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest.

Much of the existing literature on risk management strategies for multinational corporations illustrates particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, plenty of research within the international management field has been dedicated to the management of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the danger variables which is why hedging or insurance instruments could be developed to mitigate or move a firm's danger visibility. Nevertheless, current studies have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by providing empirical understanding of the risk perception of Western multinational corporations and their administration strategies at the firm level within the Middle East. In one research after collecting and analysing data 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 actually a great deal more multifaceted compared to often cited variables of political risk and exchange rate visibility. Cultural danger is regarded as more important than political risk, financial risk, and financial danger. Secondly, despite the fact that aspects of Arab culture are reported to have a strong influence on the business environment, most firms find it difficult to adapt to local routines and customs.

Regardless of the political uncertainty and unfavourable economic climates in some parts of the Middle East, foreign direct investment (FDI) in the region and, particularly, into the Arabian Gulf has been progressively increasing over the past two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the associated risk appears to be crucial. Yet, research on the risk perception of multinationals in the area is lacking in volume and quality, as professionals and attorneys 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 largely been on political risk. However, a fresh focus has come forth in present research, shining a limelight on an often-disregarded aspect namely cultural factors. In these pioneering studies, the authors remarked that companies and their administration usually really disregard the effect of social facets as a result of not enough knowledge regarding cultural factors. In fact, some empirical studies have discovered that cultural differences lower the performance of international enterprises.