How do MNCs manage cultural risks in the Arab gulf countries

How do MNCs manage cultural risks in the Arab gulf countries

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Studies claim that the success of international corporations within the Middle East hinges not only on economic acumen, but additionally on understanding and integrating into local cultures.

This cultural dimension of risk management calls for a change in how MNCs run. Conforming to regional customs is not only about understanding company etiquette; it also involves much deeper social integration, such as for instance understanding regional values, decision-making designs, and the societal norms that impact business practices and worker behaviour. In GCC countries, successful company relationships are built on trust and individual connections rather than just being transactional. Additionally, MNEs can take advantage of adjusting their human resource management to mirror the cultural profiles of regional employees, as variables influencing employee motivation and job satisfaction differ widely across cultures. This involves a shift in mindset and strategy from developing robust monetary risk management tools to investing in cultural intelligence and regional expertise as experts and solicitors 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 illustrates particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, plenty of research in the worldwide management 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 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 information about the risk perception of Western multinational corporations and their management techniques on the firm level in the Middle East. In one research after gathering and analysing data from 49 major international businesses which are active in the GCC countries, the authors discovered the following. Firstly, the risk connected with foreign investments is obviously a lot more multifaceted compared to the frequently analyzed variables of political risk and exchange rate visibility. Cultural danger is perceived as more crucial than political risk, monetary danger, and economic risk. Secondly, even though elements of Arab culture are reported to really have a strong impact on the business environment, most firms struggle to adapt to local routines and traditions.

In spite of the political uncertainty and unfavourable economic conditions in a few areas of the Middle East, international direct investment (FDI) in the area and, particularly, in the Arabian Gulf has been continuously increasing within the last two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the associated risk appears to be crucial. Yet, research regarding the risk perception of multinationals in the area is lacking in volume and quality, as consultants and lawyers like Louise Flanagan in Ras Al Khaimah may likely attest. Although various empirical research reports have examined the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a fresh focus has emerged in recent research, shining a spotlight on an often-ignored aspect specifically cultural variables. In these groundbreaking studies, the writers noticed that businesses and their administration frequently really brush aside the effect of social facets due to a not enough knowledge regarding social variables. In fact, some empirical studies have found that cultural differences lower the performance of multinational enterprises.