How do MNCs manage cultural risks in the GCC countries

How do MNCs manage cultural risks in the GCC countries

Blog Article

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

This social dimension of risk management requires a change in how MNCs function. Adjusting to regional customs is not only about understanding company etiquette; it also requires much deeper social integration, such as for instance appreciating regional values, decision-making styles, and the societal norms that affect business practices and worker behaviour. In GCC countries, successful company relationships are built on trust and individual connections rather than just being transactional. Also, MNEs can benefit from adjusting their human resource management to mirror the cultural profiles of regional employees, as factors influencing employee motivation and job satisfaction vary widely across cultures. This involves a change in mindset and strategy from developing robust monetary risk management tools to investing in cultural intelligence and regional expertise as experts and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

Much of the prevailing literature on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are hard to quantify. Certainly, a lot of research within the worldwide management field has been dedicated to the management of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the risk factors which is why hedging or insurance instruments could be developed to mitigate or move a firm's risk visibility. Nevertheless, current studies have brought some fresh and interesting insights. They have sought to fill the main research gaps by giving empirical knowledge about the risk perception of Western multinational corporations and their management methods at the firm level in the Middle East. In one research after gathering and analysing data from 49 major worldwide businesses that are active in the GCC countries, the authors discovered the following. Firstly, the risk connected with foreign investments is obviously even more multifaceted than the frequently analyzed variables of political risk and exchange rate exposure. Cultural risk is perceived as more essential than political risk, financial risk, and financial risk. Secondly, despite the fact that 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 certain elements of the Middle East, foreign direct investment (FDI) in the region and, particularly, within 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 solicitors like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical studies have investigated the effect of risk on FDI, most analyses have been on political risk. Nevertheless, a new focus has appeared in current research, shining a spotlight on an often-neglected aspect specifically cultural variables. In these groundbreaking studies, the writers noticed that businesses and their management frequently seriously disregard the effect of social factors due to a lack of knowledge regarding cultural variables. In fact, some empirical studies have unearthed that cultural differences lower the performance of international enterprises.