On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

The Middle East is attracting global investment, particularly the Gulf area. Learn more about risk management in the gulf.

This social dimension of risk management calls for a change in how MNCs work. Adjusting to regional customs is not only about understanding business etiquette; it also requires much deeper cultural integration, such as for example appreciating 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 reap the benefits of adapting their human resource administration to reflect the social profiles of local workers, as factors affecting employee motivation and job satisfaction vary widely across countries. This requires a shift in mind-set and strategy from developing robust economic risk management tools to investing in cultural intelligence and local 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 demonstrates particular uncertainties but omits uncertainties that are difficult to quantify. Indeed, a lot of research in the worldwide administration field has centered on the handling of either political risk or foreign exchange uncertainties. Finance and insurance literature emphasises the danger factors for which hedging or insurance coverage instruments can be developed to mitigate or transfer a company's risk exposure. But, recent studies have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by providing empirical understanding of the risk perception of Western multinational corporations and their administration strategies 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 actually much more multifaceted compared to usually cited factors of political risk and exchange rate exposure. Cultural danger is regarded as more important 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 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 gradually increasing in the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the linked risk seems to be 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 studies have investigated the effect of risk on FDI, most analyses have been on political risk. However, a brand new focus has come forth in present research, shining a limelight on an often-disregarded aspect namely cultural factors. In these pioneering studies, the authors pointed out that companies and their management usually really underestimate the impact of social facets as a result of not enough knowledge regarding social factors. In reality, some empirical research reports have discovered that cultural differences lower the performance of multinational enterprises.