How do MNCs manage cultural risks in the GCC countries

How do MNCs manage cultural risks in the GCC countries

Blog Article

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

This cultural dimension of risk management calls for a shift in how MNCs work. Adapting to regional traditions is not only about being familiar with company etiquette; it also requires much deeper social integration, such as for instance understanding local values, decision-making styles, and the societal norms that impact business practices and employee behaviour. In GCC countries, successful business relationships are built on trust and personal connections instead of just being transactional. Additionally, MNEs can reap the benefits of adjusting their human resource administration to mirror the social profiles of local employees, as factors influencing employee motivation and job satisfaction vary widely across cultures. This requires a shift in mindset and strategy from developing robust financial risk management tools to investing in cultural intelligence and local expertise as experts and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

Regardless of the political instability and unfavourable economic conditions in some parts of the Middle East, foreign direct investment (FDI) in the region and, particularly, into the Arabian Gulf has been steadily increasing over the past 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the linked risk appears to be crucial. Yet, research on the risk perception of multinationals in the region is limited in quantity and quality, as specialists and solicitors like Louise Flanagan in Ras Al Khaimah would probably attest. Although different empirical studies have investigated the effect of risk on FDI, most analyses have largely been on political risk. Nonetheless, a brand new focus has appeared in current research, shining a spotlight on an often-overlooked aspect particularly cultural facets. In these groundbreaking studies, the writers pointed out that businesses and their administration frequently seriously take too lightly the impact of social factors because of a not enough knowledge regarding social variables. In fact, some empirical research reports have discovered that cultural differences lower the performance of multinational enterprises.

Much of the prevailing academic work on risk management strategies for multinational corporations demonstrates particular uncertainties but omits uncertainties that are difficult to quantify. Indeed, plenty of research in 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 firm's danger exposure. However, present studies have brought some fresh and interesting insights. They have sought to fill part of the research gaps by giving empirical understanding of the risk perception of Western multinational corporations and their management methods at the company level in the Middle East. In one investigation after gathering and analysing data from 49 major worldwide companies that are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk connected with foreign investments is actually far more multifaceted compared to the often examined variables of political risk and exchange rate exposure. Cultural danger is perceived as more essential than political risk, monetary risk, and financial risk. Secondly, despite the fact that aspects of Arab culture are reported to really have a strong impact on the business environment, most firms find it difficult to adapt to regional routines and customs.