On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

The Middle East is attracting global investment, particularly the Gulf area. Discover more about risk management in the gulf.

This social dimension of risk management demands a shift in how MNCs work. Conforming to regional customs is not just about being familiar with company etiquette; it also involves much deeper cultural integration, such as for instance understanding regional values, decision-making styles, and the societal norms that impact company practices and worker conduct. In GCC countries, successful business relationships are built on trust and personal connections instead of just being transactional. Additionally, MNEs can benefit from adapting their human resource management to mirror the social profiles of regional employees, as factors influencing employee motivation and job satisfaction vary widely across countries. This calls for a change 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 steadily 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 crucial. Yet, research on the risk perception of multinationals in the region is limited in quantity and quality, as experts and attorneys like Louise Flanagan in Ras Al Khaimah may likely attest. Although various empirical studies have investigated the effect of risk on FDI, most analyses have been on political risk. Nevertheless, a new focus has surfaced in recent research, shining a spotlight on an often-overlooked aspect namely cultural factors. In these revolutionary studies, the researchers remarked that businesses and their administration frequently seriously neglect the impact of cultural factors as a result of not enough knowledge regarding social factors. In fact, some empirical studies have found that cultural differences lower the performance of international enterprises.

A lot of the present literature on risk management strategies for multinational corporations demonstrates particular uncertainties but omits uncertainties that are difficult to quantify. Indeed, plenty of research within the worldwide management field has focused on the management of either political risk or foreign currency exchange uncertainties. Finance and insurance coverage literature emphasises the danger factors for which hedging or insurance coverage instruments are developed to mitigate or move a firm's danger visibility. Nonetheless, current 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 methods on the firm level in the Middle East. In one research after collecting and analysing data from 49 major worldwide companies that are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk associated with foreign investments is clearly even more multifaceted compared to frequently cited factors of political risk and exchange rate exposure. Cultural danger is perceived as more essential than political risk, economic risk, and financial risk. Secondly, even though elements of Arab culture are reported to have a strong impact on the business environment, most firms find it difficult to adapt to local routines and traditions.