According to current research, a major challenge for firms within the GCC is adjusting to regional customs and business practices. Learn more about this here.
In spite of the political instability and unfavourable economic climates in certain parts of the Middle East, international direct investment (FDI) in the region and, especially, in the Arabian Gulf has been gradually increasing in the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the linked risk seems to be essential. Yet, research regarding the risk perception of multinationals in the region is limited in amount and quality, as specialists and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical research reports have investigated the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a fresh focus has surfaced in current research, shining a spotlight on an often-neglected aspect specifically cultural variables. In these revolutionary studies, the researchers remarked that businesses and their administration frequently seriously disregard the effect of cultural factors because of a lack of knowledge regarding cultural variables. In reality, some empirical research reports have unearthed that cultural differences lower the performance of multinational enterprises.
This cultural dimension of risk management requires a shift in how MNCs function. Conforming to local customs is not just about understanding business etiquette; it also involves much deeper cultural integration, such as appreciating regional values, decision-making designs, and the societal norms that affect company practices and employee behaviour. In GCC countries, successful business relationships are designed on trust and individual connections instead of just being transactional. Additionally, MNEs can take advantage of adapting their human resource management to reflect the social profiles of regional workers, as factors influencing employee motivation and job satisfaction vary widely across cultures. This requires a shift in mindset and strategy from developing robust financial risk management tools to investing in social intelligence and regional expertise as specialists and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.
A lot of the present academic work on risk management strategies for multinational corporations illustrates particular uncertainties but omits uncertainties that are tough to quantify. Certainly, lots of research in the international management field has focused on the management of either political risk or foreign exchange uncertainties. Finance and insurance literature emphasises the danger variables for which hedging or insurance instruments can be developed to mitigate or move a company's risk visibility. Nonetheless, present studies have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by giving empirical understanding of the risk perception of Western multinational corporations and their management methods on the firm level in the Middle East. In one investigation after collecting and analysing information from 49 major worldwide companies that are have extensive operations in the GCC countries, the authors discovered the following. Firstly, the risk associated with foreign investments is obviously a great deal more multifaceted compared to the often examined factors of political risk and exchange rate exposure. Cultural danger is perceived as more important than political risk, monetary danger, and economic danger. Secondly, even though 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 customs.