How do MNCs manage cultural risks in the Arab gulf countries

How do MNCs manage cultural risks in the Arab gulf countries

Blog Article

Studies suggest that the success of international businesses in the Middle East hinges not merely on monetary acumen, but in addition on understanding and integrating into regional cultures.

This social dimension of risk management calls for a change in how MNCs operate. Adapting to local traditions is not just about understanding company etiquette; it also requires much deeper cultural integration, such as for instance understanding regional values, decision-making styles, and the societal norms that impact company practices and worker behaviour. In GCC countries, successful business relationships are made on trust and individual connections rather than just being transactional. Moreover, MNEs can take advantage of adjusting their human resource management to reflect the cultural profiles of local workers, as variables affecting employee motivation and job satisfaction vary widely across cultures. This involves a change in mind-set and strategy from developing robust financial risk management tools to investing in cultural intelligence and local expertise as professionals and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest.

Despite the political instability and unfavourable fiscal conditions in certain elements of the Middle East, international direct investment (FDI) in the area and, particularly, 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 connected risk is apparently essential. Yet, research regarding the risk perception of multinationals in the area is lacking in volume and quality, as consultants and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical research reports have examined the effect of risk on FDI, most analyses have largely been on political risk. Nevertheless, a new focus has emerged in present research, shining a limelight on an often-disregarded aspect particularly cultural variables. In these groundbreaking studies, the writers pointed out that companies and their management usually really overlook the effect of social facets due to a lack of knowledge regarding cultural variables. In reality, some empirical research reports have discovered that cultural differences lower the performance of multinational enterprises.

Much of the existing academic work on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are tough to quantify. Certainly, lots of research within the worldwide management field has focused on the management of either political risk or foreign currency exchange uncertainties. Finance and insurance coverage literature emphasises the risk factors which is why hedging or insurance coverage instruments could be developed to mitigate or transfer a company's danger exposure. However, present research reports have brought some fresh and interesting insights. They have sought to fill area of the research gaps by providing empirical knowledge about the risk perception of Western multinational corporations and their administration techniques at the company level within the Middle East. In one investigation after gathering 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 obviously much more multifaceted compared to the often cited variables of political risk and exchange rate exposure. Cultural danger is regarded as more essential than political risk, financial danger, and economic danger. Secondly, even though elements of Arab culture are reported to have a strong influence on the business environment, most firms battle to adapt to local routines and traditions.