Exactly how do MNCs manage cultural risks in the Arab gulf countries

Exactly how do MNCs manage cultural risks in the Arab gulf countries

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Find out more exactly how Western multinational corporations perceive and manage dangers within the Middle East.

A lot of the prevailing literature on risk management strategies for multinational corporations demonstrates particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, a lot of research within the international administration field has centered on 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 are developed to mitigate or move a company's risk visibility. However, current studies 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 techniques on the firm level within the Middle East. In one investigation after gathering and analysing data from 49 major international companies which are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk related to foreign investments is clearly a lot more multifaceted than the often cited factors of political risk and exchange rate visibility. Cultural risk is regarded as more essential than political risk, financial risk, and economic risk. Secondly, despite the fact that elements of Arab culture are reported to have a strong impact on the business environment, most firms battle to adapt to local routines and customs.

Regardless of the political uncertainty and unfavourable economic conditions in certain parts of the Middle East, foreign direct investment (FDI) in the area and, specially, within the Arabian Gulf has been considerably increasing over the past two decades. The relevance of the Middle East and Gulf areas is growing for FDI, and the linked risk appears to be important. Yet, research on the risk perception of multinationals in the area is limited in volume and quality, as professionals and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although different empirical studies have investigated the effect of risk on FDI, most analyses have been on political risk. However, a brand new focus has appeared in recent research, shining a limelight on an often-disregarded aspect namely cultural variables. In these revolutionary studies, the researchers remarked that businesses and their administration often seriously take too lightly the impact of cultural facets due to a not enough knowledge regarding social factors. In reality, some empirical research reports have unearthed that cultural differences lower the performance of multinational enterprises.

This cultural dimension of risk management requires a shift in how MNCs function. Conforming to regional traditions is not only about being familiar with company etiquette; it also involves much deeper cultural integration, such as for instance appreciating local values, decision-making designs, and the societal norms that impact company practices and worker conduct. In GCC countries, successful company relationships are designed on trust and individual connections instead of just being transactional. Also, MNEs can take advantage of adapting their human resource management to reflect the cultural profiles of local workers, as variables influencing employee motivation and job satisfaction differ widely across countries. This calls for a change in mind-set and strategy from developing robust monetary risk management tools to investing in social intelligence and regional expertise as specialists and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.