Exactly how do MNCs manage cultural risks in the GCC countries

Exactly how do MNCs manage cultural risks in the GCC countries

Blog Article

Studies suggest that the prosperity of multinational corporations within the Middle East hinges not only on economic acumen, but also on understanding and integrating into local cultures.

Despite the political uncertainty and unfavourable fiscal conditions in a few parts of the Middle East, international direct investment (FDI) in the area and, especially, in the Arabian Gulf has been steadily increasing within the last 20 years. The relevance of the Middle East and Gulf markets is growing for FDI, and the linked risk appears to be important. Yet, research regarding the risk perception of multinationals in the area is limited in volume and quality, as professionals and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although different empirical studies have examined the effect of risk on FDI, many analyses have been on political risk. Nonetheless, a brand new focus has surfaced in recent research, shining a limelight on an often-neglected aspect namely cultural facets. In these groundbreaking studies, the writers pointed out that businesses and their administration often really overlook the impact of cultural facets due to a lack of knowledge regarding cultural factors. In fact, some empirical research reports have discovered that cultural differences lower the performance of international enterprises.

Much of the prevailing literature on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are hard to quantify. Indeed, lots of research within the international administration field has centered on the handling of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the risk variables for which hedging or insurance coverage instruments can be developed to mitigate or transfer a company's risk visibility. However, current studies have brought some fresh and interesting insights. They have sought to fill area of the research gaps by giving empirical understanding of the risk perception of Western multinational corporations and their administration strategies on the company level in the Middle East. In one research after gathering and analysing data from 49 major worldwide businesses that are have extensive operations in the GCC countries, the authors discovered the following. Firstly, the risk associated with foreign investments is actually much more multifaceted compared to usually examined variables of political risk and exchange rate visibility. Cultural risk is perceived as more essential than political risk, financial risk, and financial danger. 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 traditions.

This social dimension of risk management calls for a shift in how MNCs do business. Adjusting to local traditions is not only about understanding business etiquette; it also involves much deeper social integration, such as for example appreciating local values, decision-making designs, and the societal norms that affect company practices and employee behaviour. In GCC countries, successful company relationships are designed on trust and individual connections rather than just being transactional. Moreover, MNEs can reap the benefits of adjusting their human resource administration to reflect the cultural profiles of local workers, as factors influencing employee motivation and job satisfaction vary widely across countries. This requires a shift in mind-set and strategy from developing robust financial risk management tools to investing in social intelligence and regional expertise as consultants and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.