Exactly how do MNCs manage cultural risks in the GCC countries

Exactly how do MNCs manage cultural risks in the GCC countries

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

This social dimension of risk management calls for a change in how MNCs work. Adjusting to regional customs is not only about being familiar with business etiquette; it also requires much deeper cultural integration, such as for example appreciating regional values, decision-making styles, and the societal norms that affect company practices and employee behaviour. In GCC countries, successful business relationships are designed on trust and personal connections instead of just being transactional. Furthermore, MNEs can reap the benefits of adapting their human resource administration to reflect the social profiles of local workers, as variables influencing employee motivation and job satisfaction differ widely across countries. This requires a change in mind-set and strategy from developing robust financial risk management tools to investing in social intelligence and regional expertise as experts and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

A lot of the existing literature on risk management strategies for multinational corporations emphasises particular uncertainties but omits uncertainties that are difficult to quantify. Indeed, lots 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 variables for which hedging or insurance instruments could be developed to mitigate or move a firm's risk exposure. But, present studies have brought some fresh and interesting insights. They have sought to fill area of the research gaps by giving empirical information about the risk perception of Western multinational corporations and their management techniques on the company level within the Middle East. In one research after collecting and analysing data from 49 major international businesses which are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk associated with foreign investments is actually even more multifaceted compared to the frequently examined factors of political risk and exchange rate exposure. Cultural risk is perceived as more crucial than political risk, monetary danger, and financial danger. Secondly, even though aspects of Arab culture are reported to have a strong impact on the business environment, most firms battle to adapt to regional routines and customs.

Despite the political instability and unfavourable fiscal conditions in certain elements of the Middle East, foreign direct investment (FDI) in the region and, especially, within the Arabian Gulf has been progressively increasing within the last 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 would likely attest. Although various empirical studies have investigated the effect of risk on FDI, most analyses have been on political risk. However, a brand new focus has come forth in present research, shining a limelight on an often-disregarded aspect particularly cultural facets. 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 variables. In fact, some empirical studies have found that cultural differences lower the performance of multinational enterprises.