Find out more exactly how Western multinational corporations perceive and handle dangers in 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, plenty of research within the worldwide administration field has centered on the management of either political risk or foreign exchange uncertainties. Finance and insurance literature emphasises the risk variables which is why hedging or insurance coverage instruments could be developed to mitigate or transfer a firm's risk visibility. But, present research reports have brought some fresh and interesting insights. They have sought to fill the main research gaps by providing empirical knowledge about the risk perception of Western multinational corporations and their administration methods on the firm level in the Middle East. In one research after gathering and analysing information from 49 major international companies which are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk associated with foreign investments is obviously much more multifaceted compared to the often analyzed factors of political risk and exchange rate visibility. Cultural danger is perceived as more important than political risk, financial danger, and financial risk. Secondly, despite the fact that elements of Arab culture are reported to have a strong influence 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. Conforming to local customs is not only about understanding business etiquette; it also requires 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 benefit from adjusting their human resource management to mirror the cultural profiles of local workers, as factors 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 social intelligence and local expertise as professionals and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.
Despite the political uncertainty and unfavourable economic conditions in a few parts of the Middle East, international direct investment (FDI) in the region and, especially, in the Arabian Gulf has been progressively increasing over the past 20 years. The relevance of the Middle East and Gulf markets is growing for FDI, and the connected risk seems to be crucial. Yet, research on the risk perception of multinationals in the region is lacking in quantity and quality, as professionals and lawyers like Louise Flanagan in Ras Al Khaimah may likely attest. Although various empirical studies have examined the effect of risk on FDI, most analyses have largely been on political risk. Nonetheless, a brand new focus has materialised in recent research, shining a limelight on an often-overlooked aspect specifically cultural facets. In these pioneering studies, the writers noticed that businesses and their administration often seriously underestimate the impact of social facets because of a not enough knowledge regarding social variables. In fact, some empirical research reports have unearthed that cultural differences lower the performance of multinational enterprises.