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, particularly 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 understanding company etiquette; it also involves 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. Additionally, MNEs can take advantage of adjusting their human resource management to mirror the cultural profiles of regional employees, as variables influencing employee motivation and job satisfaction differ widely across cultures. This calls for a shift 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 would likely suggest.

A lot of the prevailing literature on risk management strategies for multinational corporations emphasises particular uncertainties but omits uncertainties that are hard to quantify. Certainly, a lot of research in the worldwide management field has centered on 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. However, current research reports have brought some fresh and interesting insights. They have sought to fill part of the research gaps by giving empirical information about the risk perception of Western multinational corporations and their management techniques on the firm level in the Middle East. In one research after gathering and analysing data from 49 major international businesses which are active in the GCC countries, the authors found the following. Firstly, the risk connected with foreign investments is obviously more multifaceted compared to the usually examined factors of political risk and exchange rate visibility. Cultural danger is regarded as more important than political risk, economic danger, and financial danger. Secondly, even though aspects of Arab culture are reported to really 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 climates in certain parts of the Middle East, foreign direct investment (FDI) in the region and, especially, into 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 connected risk appears to be essential. Yet, research regarding the risk perception of multinationals in the area is lacking in quantity and quality, as experts and attorneys like Louise Flanagan in Ras Al Khaimah may likely attest. Although different empirical research reports have examined the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a fresh focus has emerged in recent research, shining a spotlight on an often-ignored aspect specifically cultural variables. In these groundbreaking studies, the writers noticed that businesses and their administration frequently seriously brush aside the effect of social facets due to a lack of knowledge regarding cultural variables. In fact, some empirical studies have found that cultural differences lower the performance of multinational enterprises.