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 claim that the success of international companies within the Middle East hinges not just on financial acumen, but also on understanding and integrating into local cultures.

This social dimension of risk management requires a shift in how MNCs function. Adapting to regional customs is not just about being familiar with business etiquette; it also requires much deeper cultural integration, such as for example appreciating regional values, decision-making styles, and the societal norms that affect company practices and worker behaviour. In GCC countries, successful business relationships are made 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 cultures. This calls for a shift in mind-set and strategy from developing robust financial risk management tools to investing in social intelligence and local expertise as professionals and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

A lot of the existing literature on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are hard to quantify. Certainly, a lot of research within the international management field has been dedicated to the management of either political risk or foreign currency exchange uncertainties. Finance and insurance coverage literature emphasises the risk variables which is why hedging or insurance instruments could be developed to mitigate or move a firm's risk visibility. However, current research reports have brought some fresh and interesting insights. They have sought to fill the main research gaps by giving empirical knowledge about the risk perception of Western multinational corporations and their management methods at the firm level within the Middle East. In one research after collecting and analysing data from 49 major worldwide businesses that are active in the GCC countries, the authors discovered the following. Firstly, the risk connected with foreign investments is obviously even more multifaceted compared to the frequently analyzed variables of political risk and exchange rate exposure. Cultural risk is regarded as more essential than political risk, financial risk, and economic danger. Secondly, even though aspects of Arab culture are reported to really have a strong impact on the business environment, most firms battle 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 continuously increasing within the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the associated risk seems to be crucial. Yet, research on the risk perception of multinationals in the area is limited in volume and quality, as specialists and attorneys like Louise Flanagan in Ras Al Khaimah would probably attest. Although different empirical studies have investigated 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-neglected aspect namely cultural factors. In these pioneering studies, the authors noticed that businesses and their administration frequently really disregard the effect of social facets as a result of lack of knowledge regarding social factors. In fact, some empirical research reports have discovered that cultural differences lower the performance of multinational enterprises.