Talking about the risk perception of MNCs in the Middle East

Talking about the risk perception of MNCs in the Middle East

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Find out more about how exactly Western multinational corporations perceive and manage dangers in the Middle East.

This cultural dimension of risk management calls for a shift in how MNCs function. Conforming to regional traditions is not just about understanding business etiquette; it also involves much deeper cultural integration, such as for instance understanding regional values, decision-making designs, and the societal norms that affect company practices and worker conduct. In GCC countries, successful company relationships are built on trust and personal connections rather than just being transactional. Moreover, MNEs can take advantage of adapting their human resource management to mirror the social 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 may likely suggest.

Regardless of the political instability and unfavourable economic conditions in some parts of the Middle East, foreign direct investment (FDI) in the region and, specially, into the Arabian Gulf has been steadily increasing within the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the linked risk appears to be crucial. Yet, research on the risk perception of multinationals in the region is limited in quantity and quality, as specialists and solicitors like Louise Flanagan in Ras Al Khaimah would probably attest. Although different empirical studies have investigated the effect of risk on FDI, most analyses have largely been on political risk. Nonetheless, a brand new focus has appeared in current research, shining a spotlight on an often-overlooked aspect particularly cultural facets. In these groundbreaking studies, the writers pointed out that companies and their administration frequently seriously take too lightly the impact of social factors because of a not enough knowledge regarding social variables. In fact, some empirical research reports have discovered that cultural differences lower the performance of multinational enterprises.

Much of the prevailing academic work on risk management strategies for multinational corporations demonstrates particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, lots of research in the worldwide administration field has focused on the handling of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the danger variables for which hedging or insurance coverage instruments are developed to mitigate or transfer a company's danger exposure. But, current studies have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by giving empirical knowledge about the risk perception of Western multinational corporations and their administration techniques at the company level in the Middle East. In one research after collecting and analysing information from 49 major worldwide businesses that are have extensive operations in the GCC countries, the authors discovered the following. Firstly, the risk associated with foreign investments is clearly more multifaceted than the usually examined variables of political risk and exchange rate exposure. Cultural danger is perceived as more essential than political risk, economic danger, and economic danger. Secondly, even though elements of Arab culture are reported to have a strong impact on the business environment, most firms find it difficult to adapt to regional routines and customs.