On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

The Middle East is attracting global investment, particularly the Gulf area. Learn more about risk management within the gulf.

This cultural dimension of risk management calls for a change in how MNCs run. Conforming to regional customs is not only about understanding company etiquette; it also involves much deeper social integration, such as understanding local values, decision-making designs, and the societal norms that impact company practices and employee conduct. In GCC countries, successful business relationships are designed on trust and personal connections instead of just being transactional. Moreover, MNEs can reap the benefits of adapting their human resource administration to reflect the social profiles of local workers, as factors affecting employee motivation and job satisfaction vary widely across countries. This requires a shift in mind-set and strategy from developing robust economic risk management tools to investing in social intelligence and local expertise as professionals and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

A lot of the existing literature on risk management strategies for multinational corporations emphasises particular uncertainties but omits uncertainties that are hard to quantify. Certainly, a lot of research within 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 company's risk visibility. But, recent research reports have brought some fresh and interesting insights. They have sought to fill part of the research gaps by providing empirical understanding of the risk perception of Western multinational corporations and their administration strategies at the company level within the Middle East. In one investigation after collecting and analysing information from 49 major worldwide companies that are have extensive operations in the GCC countries, the authors discovered the following. Firstly, the risk associated with foreign investments is actually a great deal more multifaceted than the often cited variables of political risk and exchange rate exposure. Cultural risk is perceived as more crucial than political risk, monetary danger, and economic risk. Secondly, despite the fact that elements of Arab culture are reported to really have a strong impact on the business environment, most firms struggle to adapt to local routines and customs.

Regardless of the political uncertainty and unfavourable economic conditions in some areas of the Middle East, foreign direct investment (FDI) in the area and, specially, into the Arabian Gulf has been steadily increasing in the last two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the connected risk is apparently essential. Yet, research regarding the risk perception of multinationals in the area is limited 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-overlooked aspect specifically cultural variables. In these groundbreaking studies, the writers noticed that companies and their management frequently seriously disregard the effect of cultural factors due to a lack of knowledge regarding cultural variables. In fact, some empirical research reports have unearthed that cultural differences lower the performance of international enterprises.