According to recent research, a major challenge for firms within the GCC is adjusting to local customs and business practices. Learn more about this here.
This social dimension of risk management requires a shift in how MNCs do business. Adapting to local traditions is not just about being familiar with business etiquette; it also requires much deeper cultural integration, such as for example understanding local values, decision-making designs, and the societal norms that influence 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 benefit from adjusting their human resource management to mirror the cultural profiles of local 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 would probably suggest.
Much 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 within the worldwide management field has been dedicated to 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 could be developed to mitigate or transfer a firm's danger exposure. Nevertheless, present studies have brought some fresh and interesting insights. They have sought to fill area of the research gaps by giving empirical knowledge about the risk perception of Western multinational corporations and their administration methods at the company level within the Middle East. In one investigation after collecting and analysing information 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 far more multifaceted compared to usually examined factors of political risk and exchange rate visibility. Cultural danger is perceived as more important than political risk, economic danger, and financial risk. Secondly, even though aspects 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, international direct investment (FDI) in the area and, specially, in the Arabian Gulf has been continuously increasing in the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the associated risk seems to be important. Yet, research on the risk perception of multinationals in the area is lacking in volume and quality, as consultants 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. Nevertheless, a new focus has surfaced in current research, shining a limelight on an often-neglected aspect particularly cultural facets. In these revolutionary studies, the researchers remarked that businesses and their administration usually really take too lightly the impact of cultural factors because of a lack of knowledge regarding cultural variables. In fact, some empirical studies have found that cultural differences lower the performance of multinational enterprises.