Speaking about the risk perception of MNCs within the Middle East

Speaking about the risk perception of MNCs within the Middle East

Blog Article

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 demonstrates particular uncertainties but omits uncertainties that are hard to quantify. Indeed, a lot of research in the international administration field has been dedicated to the handling of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the risk factors for which hedging or insurance coverage instruments are developed to mitigate or move a company's risk exposure. However, present research reports have brought some fresh and interesting insights. They have sought to fill area of the research gaps by giving empirical understanding of the risk perception of Western multinational corporations and their management strategies on the company level in the Middle East. In one investigation after gathering and analysing data from 49 major worldwide businesses which are active in the GCC countries, the authors found the following. Firstly, the risk associated with foreign investments is obviously far more multifaceted than the usually cited factors of political risk and exchange rate exposure. Cultural danger is regarded as more important than political risk, monetary danger, and economic risk. Secondly, despite the fact that aspects of Arab culture are reported to have a strong impact on the business environment, most firms battle to adapt to local routines and customs.

This social dimension of risk management requires a shift in how MNCs do business. Adapting to local traditions is not just about understanding company etiquette; it also involves much deeper cultural integration, such as for example appreciating regional values, decision-making designs, and the societal norms that influence company practices and employee behaviour. In GCC countries, successful company relationships are built on trust and individual connections rather than just being transactional. Furthermore, MNEs can reap the benefits of adapting their human resource administration to mirror the cultural profiles of regional employees, as variables influencing employee motivation and job satisfaction differ widely across cultures. This calls for a change in mindset and strategy from developing robust economic 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 likely suggest.

Regardless of the political instability and unfavourable economic climates in some elements of the Middle East, foreign direct investment (FDI) in the area and, particularly, 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 appears to be important. Yet, research on the risk perception of multinationals in the area is limited in volume and quality, as experts and solicitors like Louise Flanagan in Ras Al Khaimah would likely attest. Although different empirical studies have investigated the effect of risk on FDI, many analyses have been on political risk. However, a new focus has appeared in recent research, shining a spotlight on an often-disregarded aspect namely cultural variables. In these revolutionary studies, the authors noticed that businesses and their management frequently really neglect the effect of cultural factors due to a not enough knowledge regarding cultural variables. In reality, some empirical research reports have found that cultural differences lower the performance of international enterprises.