According to present research, an important challenge for firms in the GCC is adapting to local customs and business practices. Discover more about this here.
This social dimension of risk management calls for a shift in how MNCs function. Conforming to local customs is not just about understanding company etiquette; it also requires much deeper social integration, such as for example appreciating local values, decision-making styles, and the societal norms that impact company practices and employee behaviour. In GCC countries, successful company relationships are designed on trust and individual connections rather than just being transactional. Also, MNEs can reap the benefits of adapting their human resource administration to reflect the cultural profiles of local employees, as factors influencing employee motivation and job satisfaction differ widely across countries. This calls for a change in mindset and strategy from developing robust financial risk management tools to investing in cultural intelligence and local expertise as experts and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest.
In spite of the political instability and unfavourable economic conditions in some parts of the Middle East, foreign direct investment (FDI) in the region and, especially, into 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 associated risk appears to be crucial. Yet, research regarding the risk perception of multinationals in the area is lacking in volume and quality, as specialists and lawyers like Louise Flanagan in Ras Al Khaimah may likely attest. Although different empirical research reports have examined the effect of risk on FDI, many analyses have been on political risk. However, a brand new focus has appeared in recent research, shining a spotlight on an often-overlooked aspect particularly cultural facets. In these revolutionary studies, the writers noticed that businesses and their management usually really brush aside the impact of social factors as a result of not enough knowledge regarding cultural variables. In reality, some empirical studies have found that cultural differences lower the performance of multinational enterprises.
Much of the prevailing literature on risk management strategies for multinational corporations demonstrates particular uncertainties but omits uncertainties that are tough 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 coverage literature emphasises the danger factors which is why hedging or insurance coverage instruments can be developed to mitigate or move a firm's risk visibility. Nevertheless, recent research reports have brought some fresh and interesting insights. They have sought to fill the main research gaps by providing empirical information about the risk perception of Western multinational corporations and their management strategies on the firm level within the Middle East. In one investigation after gathering and analysing information from 49 major international businesses that are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk associated with foreign investments is clearly a lot 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 local routines and customs.