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. Discover 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 just about being familiar with business etiquette; it also requires much deeper cultural 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. Also, MNEs can benefit from adjusting their human resource management to mirror the cultural profiles of regional workers, as factors affecting employee motivation and job satisfaction vary widely across countries. This requires a change in mindset and strategy from developing robust monetary risk management tools to investing in cultural intelligence and regional expertise as consultants and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

Much of the present academic work on risk management strategies for multinational corporations demonstrates particular uncertainties but omits uncertainties that are tough to quantify. Indeed, lots of research in the international administration field has focused on the handling 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 transfer a firm's danger exposure. Nonetheless, present studies have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by providing empirical understanding of the risk perception of Western multinational corporations and their administration strategies at the company level in the Middle East. In one investigation after gathering and analysing information from 49 major international companies which are active in the GCC countries, the authors found the following. Firstly, the risk related to foreign investments is clearly much more multifaceted compared to the frequently cited factors of political risk and exchange rate visibility. Cultural danger is perceived as more crucial than political risk, economic danger, and economic risk. Secondly, despite the fact that elements of Arab culture are reported to have a strong influence on the business environment, most firms find it difficult to adapt to regional routines and traditions.

Despite the political instability and unfavourable fiscal conditions in certain parts of the Middle East, foreign direct investment (FDI) in the region and, especially, 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 connected risk is apparently essential. Yet, research on the risk perception of multinationals in the region is limited in amount and quality, as professionals 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 been on political risk. However, a brand new focus has come forth in present research, shining a limelight on an often-ignored aspect specifically cultural variables. In these groundbreaking studies, the writers noticed that businesses and their administration usually really underestimate the impact of cultural factors due to a lack of knowledge regarding social factors. In reality, some empirical research reports have discovered that cultural differences lower the performance of multinational enterprises.