How do MNCs manage cultural risks in the Arab gulf countries

How do MNCs manage cultural risks in the Arab gulf countries

Blog Article

According to present research, a significant challenge for companies in the GCC is adjusting to regional customs and business practices. Learn more about this here.

This cultural dimension of risk management demands a shift in how MNCs do business. Adjusting to regional customs is not only about understanding business etiquette; it also requires much deeper cultural integration, such as for example appreciating regional values, decision-making designs, and the societal norms that impact company practices and employee conduct. In GCC countries, successful company relationships are built on trust and individual connections rather than just being transactional. Moreover, MNEs can reap the benefits of adapting their human resource administration to mirror the cultural profiles of regional workers, as factors affecting employee motivation and job satisfaction differ widely across cultures. This involves a change in mindset and strategy from developing robust economic risk management tools to investing in social intelligence and local expertise as professionals and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest.

Much of the present academic work on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are hard to quantify. Certainly, plenty of research in the international administration field has been dedicated to the management of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the danger factors for which hedging or insurance coverage instruments are developed to mitigate or transfer a firm's risk visibility. However, recent research reports have brought some fresh and interesting insights. They have sought to fill part of the research gaps by providing empirical understanding of the risk perception of Western multinational corporations and their administration techniques on the company level in the Middle East. In one research after collecting and analysing information from 49 major worldwide businesses that are active in the GCC countries, the authors found the following. Firstly, the risk related to foreign investments is clearly much more multifaceted than the often analyzed variables of political risk and exchange rate visibility. Cultural danger is regarded as more important than political risk, financial risk, and economic risk. Secondly, even though elements of Arab culture are reported to really have a strong impact on the business environment, most firms battle to adapt to regional routines and traditions.

In spite of the political uncertainty and unfavourable economic climates in certain parts of the Middle East, foreign direct investment (FDI) in the region and, particularly, within the Arabian Gulf has been progressively increasing within the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the linked risk is apparently essential. Yet, research regarding the risk perception of multinationals in the area is lacking in amount and quality, as professionals and attorneys like Louise Flanagan in Ras Al Khaimah may likely attest. Although different empirical studies have investigated the effect of risk on FDI, most analyses have been on political risk. Nevertheless, a new focus has emerged in recent research, shining a spotlight on an often-disregarded aspect particularly cultural facets. In these revolutionary studies, the researchers noticed that companies and their management often seriously underestimate the effect of social facets due to a lack of knowledge regarding cultural factors. In reality, some empirical research reports have discovered that cultural differences lower the performance of multinational enterprises.