Studies suggest that the prosperity of multinational corporations within the Middle East hinges not merely on monetary acumen, but in addition on understanding and integrating into regional cultures.
This cultural dimension of risk management calls for a shift in how MNCs operate. Conforming to local traditions is not just about being familiar with business etiquette; it also requires much deeper cultural integration, such as for instance appreciating local values, decision-making designs, and the societal norms that impact company practices and employee behaviour. In GCC countries, successful business relationships are made on trust and personal connections rather than just being transactional. Additionally, MNEs can take advantage of adjusting their human resource management to mirror the cultural profiles of regional workers, as factors influencing employee motivation and job satisfaction differ widely across cultures. This calls for a change in mindset and strategy from developing robust financial risk management tools to investing in social intelligence and regional expertise as experts and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.
Much of the prevailing academic work on risk management strategies for multinational corporations illustrates particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, lots of research within the international 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 coverage instruments can be developed to mitigate or transfer a company's danger visibility. Nevertheless, current 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 at the company level within the Middle East. In one investigation after collecting and analysing data from 49 major worldwide businesses that are active in the GCC countries, the authors found the following. Firstly, the risk connected with foreign investments is clearly far more multifaceted compared to usually cited variables of political risk and exchange rate exposure. Cultural risk is perceived as more crucial 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 certain elements of the Middle East, foreign direct investment (FDI) in the region and, particularly, in the Arabian Gulf has been continuously increasing in the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the linked risk seems to be important. Yet, research on the risk perception of multinationals in the region is limited in quantity and quality, as specialists and attorneys like Louise Flanagan in Ras Al Khaimah would probably attest. Although different empirical research reports have investigated the effect of risk on FDI, most analyses have been on political risk. However, a brand new focus has surfaced in current research, shining a spotlight on an often-ignored aspect specifically cultural facets. In these revolutionary studies, the authors pointed out that companies and their administration frequently seriously disregard the effect of cultural facets as a result of not enough knowledge regarding social factors. In fact, some empirical studies have found that cultural differences lower the performance of international enterprises.