Talking about the risk perception of MNCs within the Middle East

Talking about the risk perception of MNCs within the Middle East

Blog Article

Find out more about how precisely Western multinational corporations perceive and manage risks within the Middle East.

A lot of the existing academic work on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are hard to quantify. Certainly, lots of research within the international administration field has focused on the management of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the danger variables for which hedging or insurance coverage instruments can be developed to mitigate or transfer a company's risk exposure. But, current research reports have brought some fresh and interesting insights. They have sought to fill area of the research gaps by providing empirical understanding of the risk perception of Western multinational corporations and their management techniques at the firm level within the Middle East. In one investigation after gathering and analysing data from 49 major worldwide companies that are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk connected with foreign investments is obviously a great deal more multifaceted compared to usually examined variables of political risk and exchange rate exposure. Cultural risk is regarded as more important than political risk, monetary risk, and economic risk. Secondly, even though elements of Arab culture are reported to have a strong influence on the business environment, most firms battle to adapt to local routines and traditions.

In spite of the political instability and unfavourable economic climates in some areas of the Middle East, international direct investment (FDI) in the region and, especially, into the Arabian Gulf has been steadily increasing in the last 20 years. The relevance of the Middle East and Gulf markets is growing for FDI, and the connected risk is apparently important. Yet, research on the risk perception of multinationals in the area is lacking in quantity and quality, as experts and solicitors like Louise Flanagan in Ras Al Khaimah would probably attest. Although various empirical studies have examined the effect of risk on FDI, many analyses have been on political risk. Nevertheless, a brand new focus has materialised in recent research, shining a spotlight on an often-neglected aspect particularly cultural factors. In these pioneering studies, the writers remarked that businesses and their administration often seriously disregard the effect of social factors because of a lack of knowledge regarding cultural factors. In reality, some empirical research reports have unearthed that cultural differences lower the performance of international enterprises.

This cultural dimension of risk management calls for a shift in how MNCs work. Adapting to regional traditions is not only about being familiar with company etiquette; it also involves much deeper cultural integration, such as appreciating local values, decision-making styles, and the societal norms that influence business practices and employee behaviour. In GCC countries, successful business relationships are made on trust and personal connections rather than just being transactional. Also, MNEs can reap the benefits of adjusting their human resource administration to mirror the social profiles of regional workers, as variables affecting employee motivation and job satisfaction vary widely across cultures. This involves a shift in mindset and strategy from developing robust economic risk management tools to investing in cultural intelligence and local expertise as experts and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.