Find out more exactly how Western multinational corporations perceive and handle dangers in the Middle East.

Despite the political instability and unfavourable economic climates in some parts of the Middle East, international direct investment (FDI) in the area and, particularly, within the Arabian Gulf has been steadily increasing in the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the associated risk appears to be essential. Yet, research regarding the risk perception of multinationals in the region is limited in amount and quality, as specialists and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical research reports have examined the effect of risk on FDI, most analyses have been on political risk. Nevertheless, a brand new focus has materialised in recent research, shining a spotlight on an often-neglected aspect namely cultural factors. In these groundbreaking studies, the writers remarked that businesses and their administration often seriously disregard the effect of social facets as a result of not enough knowledge regarding social factors. In reality, some empirical research reports have unearthed that cultural differences lower the performance of international enterprises.

This cultural dimension of risk management calls for a shift in how MNCs operate. Adjusting to local customs is not just about understanding company etiquette; it also requires much deeper social integration, such as for example understanding regional values, decision-making designs, and the societal norms that affect company practices and worker behaviour. In GCC countries, successful business relationships are made on trust and personal connections rather than just being transactional. Moreover, MNEs can benefit from adapting their human resource management to mirror the social profiles of regional workers, as variables influencing employee motivation and job satisfaction vary widely across cultures. This requires a shift in mindset and strategy from developing robust financial risk management tools to investing in social intelligence and regional expertise as professionals and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

Much of the existing literature on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are tough to quantify. Certainly, lots of research in the international administration field has centered on the management of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the danger variables for which hedging or insurance instruments are developed to mitigate or move a firm's danger visibility. Nonetheless, recent studies have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by giving empirical understanding of the risk perception of Western multinational corporations and their management strategies on the company level within the Middle East. In one research after gathering and analysing data from 49 major worldwide companies which are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk associated with foreign investments is clearly a lot more multifaceted than the usually analyzed factors of political risk and exchange rate visibility. Cultural risk is perceived as more essential than political risk, financial danger, and economic risk. Secondly, despite the fact that aspects of Arab culture are reported to really have a strong influence on the business environment, most firms struggle to adapt to regional routines and customs.