Speaking about the risk perception of MNCs within the Middle East

Speaking about the risk perception of MNCs within the Middle East

Blog Article

According to present research, an important challenge for businesses within the GCC is adjusting to regional customs and business practices. Learn more about this here.

A lot of the existing academic work on risk management strategies for multinational corporations emphasises particular uncertainties but omits uncertainties that are hard to quantify. Certainly, lots of research within the worldwide management field has centered on the handling of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the danger factors which is why hedging or insurance instruments can be developed to mitigate or move a firm's risk visibility. But, current research reports have brought some fresh and interesting insights. They have sought to fill area of the research gaps by providing empirical understanding of the risk perception of Western multinational corporations and their management methods at the company level within the Middle East. In one research after collecting and analysing information from 49 major worldwide businesses that are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk associated with foreign investments is clearly more multifaceted compared to the usually examined factors of political risk and exchange rate visibility. Cultural danger is perceived as more crucial than political risk, financial risk, and economic 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 regional routines and traditions.

This social dimension of risk management demands a change in how MNCs work. Conforming to regional traditions is not only about being familiar with business etiquette; it also requires much deeper cultural integration, such as understanding regional values, decision-making styles, and the societal norms that affect business practices and worker conduct. In GCC countries, successful company relationships are built on trust and individual connections rather than just being transactional. Moreover, MNEs can take advantage of adapting their human resource administration to reflect the social profiles of local employees, as factors affecting employee motivation and job satisfaction differ widely across cultures. This requires a change in mindset and strategy from developing robust economic risk management tools to investing in social intelligence and regional expertise as experts and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

In spite of the political instability and unfavourable economic conditions in a few parts of the Middle East, international direct investment (FDI) in the region and, especially, within the Arabian Gulf has been gradually increasing within the last two decades. The relevance of the Middle East and Gulf areas is growing for FDI, and the associated risk is apparently important. Yet, research regarding the risk perception of multinationals in the region is limited in quantity and quality, as professionals and lawyers like Louise Flanagan in Ras Al Khaimah may likely attest. Although different empirical studies have examined the effect of risk on FDI, most analyses have been on political risk. Nonetheless, a brand new focus has materialised in current research, shining a limelight on an often-overlooked aspect specifically cultural facets. In these pioneering studies, the writers remarked that businesses and their administration often seriously overlook the impact of social factors as a result of lack of knowledge regarding cultural factors. In fact, some empirical studies have found that cultural differences lower the performance of international enterprises.