Find out more exactly how Western multinational corporations perceive and handle dangers in the Middle East.
Much of the prevailing literature 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 management of either political risk or foreign exchange uncertainties. Finance and insurance literature emphasises the risk factors which is why hedging or insurance coverage instruments are developed to mitigate or transfer a firm's danger visibility. However, recent research reports 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 methods at the firm level in the Middle East. In one research after gathering and analysing information from 49 major international companies that are have extensive operations 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 danger is perceived as more important than political risk, economic danger, and financial danger. Secondly, despite the fact that elements of Arab culture are reported to have a strong influence on the business environment, most firms battle to adapt to regional routines and traditions.
In spite of the political uncertainty and unfavourable economic conditions in some parts of the Middle East, foreign direct investment (FDI) in the area and, specially, into the Arabian Gulf has been steadily increasing over the past two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the associated risk seems to be important. Yet, research on the risk perception of multinationals in the region is limited in quantity and quality, as consultants and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical studies have examined the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a fresh focus has materialised in present research, shining a limelight on an often-neglected aspect specifically cultural variables. In these groundbreaking studies, the writers noticed that companies and their management often really underestimate the effect of social facets due to a lack of knowledge regarding cultural variables. In fact, some empirical research reports have discovered that cultural differences lower the performance of international enterprises.
This cultural dimension of risk management calls for a change in how MNCs do business. Conforming to regional customs is not just about understanding company etiquette; it also requires much deeper cultural integration, such as appreciating local values, decision-making designs, and the societal norms that impact business practices and employee conduct. In GCC countries, successful company relationships are made on trust and individual connections instead of just being transactional. Furthermore, MNEs can benefit from adjusting their human resource administration to mirror the social profiles of local employees, as factors influencing employee motivation and job satisfaction differ widely across cultures. This requires a shift in mindset and strategy from developing robust monetary risk management tools to investing in social intelligence and regional expertise as specialists and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.