Exactly how do MNCs manage cultural risks in the GCC countries

Exactly how do MNCs manage cultural risks in the GCC countries

Blog Article

The Middle East is attracting global investment, especially the Gulf region. Find out more about risk management within the gulf.

Despite the political instability and unfavourable fiscal conditions in a few elements of the Middle East, international direct investment (FDI) in the area and, particularly, in the Arabian Gulf has been considerably increasing over the past 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 area is lacking in amount and quality, as professionals and solicitors like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical studies have investigated the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a fresh focus has materialised in recent research, shining a spotlight on an often-overlooked aspect specifically cultural variables. In these groundbreaking studies, the writers pointed out that companies and their management often seriously take too lightly the impact of social facets as a result of not enough knowledge regarding cultural variables. In fact, some empirical studies have unearthed that cultural differences lower the performance of international enterprises.

This social dimension of risk management requires a shift in how MNCs run. Adjusting to local traditions is not only about being familiar with business etiquette; it also involves much deeper cultural integration, such as for example understanding local values, decision-making styles, and the societal norms that influence company practices and worker behaviour. In GCC countries, successful business relationships are built on trust and personal connections instead of just being transactional. Also, MNEs can take advantage of adapting their human resource management to mirror the social profiles of regional workers, as factors influencing employee motivation and job satisfaction differ widely across countries. This involves a shift in mind-set and strategy from developing robust economic risk management tools to investing in cultural intelligence and local expertise as specialists and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

Much of the existing academic work on risk management strategies for multinational corporations illustrates particular uncertainties but omits uncertainties that are hard to quantify. Indeed, plenty of research within the international management field has been dedicated to the handling of either political risk or foreign exchange uncertainties. Finance and insurance literature emphasises the danger factors for which hedging or insurance coverage instruments could be developed to mitigate or transfer a company's danger exposure. Nevertheless, recent research reports have brought some fresh and interesting insights. They have sought to fill area of the research gaps by providing empirical information about the risk perception of Western multinational corporations and their administration strategies at the company level within the Middle East. In one investigation after collecting and analysing information from 49 major international companies that are have extensive operations in the GCC countries, the authors discovered the following. Firstly, the risk associated with foreign investments is clearly a great deal more multifaceted than the usually analyzed variables of political risk and exchange rate exposure. Cultural danger is perceived as more crucial than political risk, monetary risk, and economic danger. Secondly, despite the fact that 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.