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 claim that the success of international businesses within the Middle East hinges not merely on monetary acumen, but additionally on understanding and integrating into local cultures.

This social dimension of risk management demands a change in how MNCs operate. Conforming to local traditions is not only about understanding business etiquette; it also involves much deeper social integration, such as for example appreciating local values, decision-making styles, and the societal norms that impact business practices and employee behaviour. In GCC countries, successful business relationships are made on trust and individual connections instead of just being transactional. Additionally, MNEs can reap the benefits 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 countries. This involves a shift in mind-set 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 may likely suggest.

Regardless of the political instability and unfavourable economic climates in a few areas of the Middle East, foreign direct investment (FDI) in the area and, especially, in the Arabian Gulf has been gradually increasing within the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the associated risk appears to be important. Yet, research on the risk perception of multinationals in the region is lacking in volume and quality, as consultants and solicitors like Louise Flanagan in Ras Al Khaimah would likely attest. Although different empirical research reports have investigated the effect of risk on FDI, many analyses have been on political risk. Nevertheless, a fresh focus has come forth in recent research, shining a limelight on an often-overlooked aspect particularly cultural variables. In these revolutionary studies, the writers pointed out that businesses and their administration often really disregard the impact of social factors because of a not enough knowledge regarding cultural factors. In fact, some empirical research reports have discovered that cultural differences lower the performance of international enterprises.

Much of the existing academic work on risk management strategies for multinational corporations features particular uncertainties but omits uncertainties that are tough to quantify. Indeed, a lot of research within the international administration field has centered on the management of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the risk variables for which hedging or insurance coverage instruments could be developed to mitigate or transfer a company's risk visibility. 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 management methods on the firm level within the Middle East. In one investigation after collecting and analysing information from 49 major international companies which are active in the GCC countries, the authors discovered the following. Firstly, the risk associated with foreign investments is clearly a lot more multifaceted compared to frequently analyzed variables of political risk and exchange rate exposure. Cultural danger is regarded as more essential than political risk, financial risk, and financial risk. Secondly, despite the fact that aspects of Arab culture are reported to really have a strong influence on the business environment, most firms battle to adapt to local routines and traditions.