On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

The Middle East is attracting global investment, especially the Gulf region. Find out more about risk management within the gulf.

This cultural dimension of risk management requires a change in how MNCs operate. Adapting to regional traditions is not just about understanding business etiquette; it also requires much deeper social integration, such as appreciating local values, decision-making designs, and the societal norms that affect business practices and employee behaviour. In GCC countries, successful company relationships are designed on trust and individual connections rather than just being transactional. Moreover, MNEs can take advantage of adjusting their human resource administration to mirror the cultural profiles of local employees, as factors affecting employee motivation and job satisfaction differ widely across countries. This calls for a shift in mindset and strategy from developing robust financial risk management tools to investing in cultural intelligence and local expertise as professionals and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

Despite the political instability and unfavourable fiscal conditions in a few areas of the Middle East, international direct investment (FDI) in the area and, specially, into the Arabian Gulf has been considerably increasing over the past two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the associated risk seems to be important. Yet, research on the risk perception of multinationals in the region is limited in quantity and quality, as consultants and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical studies have investigated the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a fresh focus has materialised in present research, shining a limelight on an often-disregarded aspect particularly cultural facets. In these revolutionary studies, the writers noticed that companies and their management often seriously take too lightly the impact of cultural facets as a result of not enough knowledge regarding social variables. In fact, some empirical studies have unearthed that cultural differences lower the performance of international enterprises.

A lot of the present literature on risk management strategies for multinational corporations features particular uncertainties but omits uncertainties that are difficult to quantify. Indeed, plenty of research within the worldwide management field has focused on the handling of either political risk or foreign currency exchange uncertainties. Finance and insurance coverage literature emphasises the risk factors which is why hedging or insurance coverage instruments could be developed to mitigate or transfer a company's danger exposure. However, present research reports have brought some fresh and interesting insights. They have sought to fill area of the research gaps by providing empirical knowledge about the risk perception of Western multinational corporations and their administration techniques at the company level within the Middle East. In one investigation after gathering and analysing information from 49 major international businesses which are active in the GCC countries, the authors found the following. Firstly, the risk connected with foreign investments is actually more multifaceted than the usually analyzed factors of political risk and exchange rate visibility. Cultural risk is regarded as more crucial 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.