On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

According to recent research, a significant challenge for firms within the GCC is adjusting to local customs and business practices. Find out more about this right here.

This social dimension of risk management demands a shift in how MNCs work. Adjusting to local customs is not only about being familiar with 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 worker conduct. In GCC countries, successful company relationships are designed on trust and individual connections rather than just being transactional. Furthermore, MNEs can benefit from adapting their human resource management to reflect the cultural profiles of regional workers, as variables affecting employee motivation and job satisfaction vary widely across countries. This calls for a change in mind-set and strategy from developing robust financial risk management tools to investing in social intelligence and local expertise as professionals and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

Despite the political uncertainty and unfavourable economic conditions in certain areas of the Middle East, foreign direct investment (FDI) in the region and, specially, into the Arabian Gulf has been considerably increasing within the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the linked risk appears to be crucial. Yet, research on the risk perception of multinationals in the region is limited in quantity and quality, as consultants and solicitors like Louise Flanagan in Ras Al Khaimah would probably attest. Although different empirical research reports have investigated the effect of risk on FDI, most analyses have largely been on political risk. Nonetheless, a fresh focus has come forth in current research, shining a spotlight on an often-ignored aspect namely cultural facets. In these revolutionary studies, the writers noticed that companies and their administration usually really neglect the impact of social facets due to a lack of knowledge regarding social factors. In fact, some empirical studies have unearthed that cultural differences lower the performance of international enterprises.

Much of the existing academic work on risk management strategies for multinational corporations illustrates particular uncertainties but omits uncertainties that are hard to quantify. Indeed, plenty of research within the international management field has been dedicated to the management of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the danger factors which is why hedging or insurance coverage instruments can be developed to mitigate or move a firm's risk visibility. Nevertheless, recent research reports have brought some fresh and interesting insights. They have sought to fill the main research gaps by providing empirical information about the risk perception of Western multinational corporations and their management strategies on the firm level within the Middle East. In one research 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 connected with foreign investments is actually a lot more multifaceted than the usually analyzed factors of political risk and exchange rate visibility. Cultural risk is perceived as more essential than political risk, economic danger, and financial risk. Secondly, despite the fact that aspects of Arab culture are reported to really have a strong impact on the business environment, most firms struggle to adapt to regional routines and customs.