How do MNCs manage cultural risks in the Arab gulf countries

How do MNCs manage cultural risks in the Arab gulf countries

Blog Article

The Middle East is attracting global investment, particularly the Gulf region. Learn more about risk management in the gulf.

This cultural dimension of risk management demands a shift in how MNCs operate. Adapting to local traditions is not just about being familiar with business etiquette; it also requires much deeper cultural integration, such as understanding local values, decision-making designs, and the societal norms that influence company practices and employee conduct. In GCC countries, successful business relationships are designed on trust and personal connections instead of just being transactional. Moreover, MNEs can reap the benefits of adapting their human resource administration to reflect the social profiles of local workers, as factors affecting employee motivation and job satisfaction vary widely across cultures. This calls for a shift in mind-set 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.

A lot of the existing academic work on risk management strategies for multinational corporations features particular uncertainties but omits uncertainties that are hard to quantify. Certainly, a lot of research within the international management field has been dedicated to the management of either political risk or foreign currency exchange uncertainties. Finance and insurance coverage literature emphasises the risk variables which is why hedging or insurance instruments could be developed to mitigate or move a firm's risk visibility. However, current research reports have brought some fresh and interesting insights. They have sought to fill part of the research gaps by providing empirical information about the risk perception of Western multinational corporations and their management strategies on the company level in the Middle East. In one investigation after gathering and analysing information from 49 major international companies which are active in the GCC countries, the authors found the following. Firstly, the risk connected with foreign investments is obviously more multifaceted compared to the frequently examined factors of political risk and exchange rate visibility. Cultural danger is regarded as more important than political risk, economic danger, and financial danger. Secondly, even though aspects of Arab culture are reported to have a strong influence on the business environment, most firms find it difficult to adapt to regional routines and traditions.

Despite the political instability and unfavourable fiscal conditions in a few elements of the Middle East, international direct investment (FDI) in the region and, particularly, within the Arabian Gulf has been progressively 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 consultants and lawyers like Louise Flanagan in Ras Al Khaimah may likely attest. Although various empirical research reports have examined the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a new focus has surfaced in current research, shining a spotlight on an often-neglected aspect specifically cultural variables. In these revolutionary studies, the researchers remarked that businesses and their administration usually really overlook the effect of social facets as a result of not enough knowledge regarding social factors. In reality, some empirical research reports have unearthed that cultural differences lower the performance of international enterprises.