Discussing the risk perception of MNCs in the Middle East

Discussing the risk perception of MNCs in the Middle East

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Studies claim that the success of international companies in the Middle East hinges not just on monetary acumen, but in addition on understanding and integrating into regional cultures.

This social dimension of risk management requires a change in how MNCs do business. Adjusting to local customs is not just about being familiar with company etiquette; it also requires much deeper social integration, such as appreciating local values, decision-making styles, and the societal norms that impact business practices and employee behaviour. In GCC countries, successful company relationships are made on trust and individual connections instead of just being transactional. Additionally, MNEs can reap the benefits of adapting their human resource management to reflect the cultural profiles of local employees, 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 cultural intelligence and local expertise as consultants and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

Despite the political uncertainty and unfavourable fiscal conditions in certain elements of the Middle East, international direct investment (FDI) in the area and, particularly, in the Arabian Gulf has been gradually increasing in the last two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the connected risk appears to be crucial. Yet, research regarding the risk perception of multinationals in the region is limited in amount and quality, as professionals and attorneys like Louise Flanagan in Ras Al Khaimah may likely attest. Although different empirical research reports have investigated the effect of risk on FDI, most analyses have been on political risk. However, a brand new focus has surfaced in current research, shining a spotlight on an often-ignored aspect namely cultural facets. In these pioneering studies, the authors pointed out that businesses and their administration usually really brush aside the effect of cultural factors because of a lack of knowledge regarding social factors. In reality, some empirical research reports have discovered that cultural differences lower the performance of multinational enterprises.

Much of the existing academic work on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are tough to quantify. Certainly, lots of research in the international administration field has been dedicated to the handling of either political risk or foreign exchange uncertainties. Finance and insurance literature emphasises the danger variables which is why hedging or insurance instruments can be developed to mitigate or move a company's risk exposure. But, current studies have brought some fresh and interesting insights. They have sought to fill part of the research gaps by giving empirical information about the risk perception of Western multinational corporations and their management strategies on the company level in the Middle East. In one research after gathering and analysing data from 49 major international businesses that are active in the GCC countries, the authors discovered the following. Firstly, the risk related to foreign investments is obviously a great deal more multifaceted compared to the often examined variables of political risk and exchange rate exposure. Cultural danger is regarded as more important than political risk, monetary danger, and economic danger. Secondly, even though elements 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.