Find out more about how exactly Western multinational corporations perceive and manage dangers within the Middle East.
Much of the existing literature on risk management strategies for multinational corporations features particular uncertainties but omits uncertainties that are difficult to quantify. Indeed, a lot of research in the international management field has been dedicated to the handling of either political risk or foreign currency exchange uncertainties. Finance and insurance coverage literature emphasises the danger variables for which hedging or insurance coverage instruments could be developed to mitigate or move a company'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 giving empirical information about the risk perception of Western multinational corporations and their administration techniques at the firm level within the Middle East. In one research after gathering and analysing data from 49 major international businesses which are active in the GCC countries, the authors found the following. Firstly, the risk associated with foreign investments is obviously much more multifaceted compared to the usually analyzed factors of political risk and exchange rate visibility. Cultural danger is perceived as more essential than political risk, monetary risk, and economic danger. Secondly, even though aspects of Arab culture are reported to really have a strong impact on the business environment, most firms struggle to adapt to regional routines and traditions.
This cultural dimension of risk management calls for a change in how MNCs do business. Adapting to local traditions is not only about understanding company etiquette; it also involves much deeper cultural integration, such as for example understanding local values, decision-making designs, and the societal norms that impact business practices and worker behaviour. In GCC countries, successful company relationships are made on trust and personal connections instead of just being transactional. Moreover, MNEs can reap the benefits of adjusting their human resource management to mirror the cultural profiles of regional employees, as variables affecting employee motivation and job satisfaction vary widely across countries. This involves a change in mindset and strategy from developing robust financial risk management tools to investing in cultural intelligence and regional expertise as experts and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest.
Despite the political instability and unfavourable economic climates in some elements of the Middle East, foreign direct investment (FDI) in the area and, particularly, into the Arabian Gulf has been considerably increasing in the last 20 years. 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 lacking in amount 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. However, a fresh focus has surfaced in present research, shining a spotlight on an often-neglected aspect particularly cultural factors. In these revolutionary studies, the authors noticed that businesses and their administration often really take too lightly the impact of social factors because of a lack of knowledge regarding cultural factors. In reality, some empirical studies have found that cultural differences lower the performance of multinational enterprises.