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 claim that the success of international businesses in the Middle East hinges not merely on monetary acumen, but additionally on understanding and integrating into local cultures.

A lot of the existing academic work on risk management strategies for multinational corporations features particular uncertainties but omits uncertainties that are tough to quantify. Indeed, plenty of research in the worldwide administration field has centered 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 move a firm's danger visibility. Nevertheless, present 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 at 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 related to foreign investments is clearly far more multifaceted compared to the usually examined factors of political risk and exchange rate visibility. Cultural risk is perceived as more crucial than political risk, monetary risk, and economic danger. 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 linked risk is apparently important. 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 likely attest. Although various empirical research reports have investigated the effect of risk on FDI, most analyses have been on political risk. However, a brand new focus has materialised in recent research, shining a spotlight on an often-ignored aspect particularly cultural facets. In these revolutionary studies, the researchers remarked that businesses and their administration often seriously take too lightly the impact of cultural factors due to a lack of knowledge regarding cultural variables. In fact, some empirical studies have found that cultural differences lower the performance of international enterprises.

This social dimension of risk management demands a change in how MNCs operate. Adjusting to regional traditions is not only about being familiar with company etiquette; it also requires much deeper social integration, such as for instance appreciating local values, decision-making styles, and the societal norms that influence company practices and worker conduct. In GCC countries, successful company relationships are made on trust and personal connections rather than just being transactional. Furthermore, MNEs can reap the benefits of adjusting their human resource administration to mirror the cultural profiles of local employees, as factors influencing employee motivation and job satisfaction differ widely across countries. This calls for a change in mindset and strategy from developing robust economic risk management tools to investing in cultural intelligence and local expertise as experts and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.