The Middle East, specially the Arabian Gulf, has experienced a notable increase in foreign direct investment. Learn about the risks that companies might encounter.
Focusing on adjusting to regional traditions is essential but not enough for effective integration. Integration is a loosely defined concept involving several things, such as for instance appreciating local values, understanding decision-making styles beyond a restricted transactional business viewpoint, and looking at societal norms that influence business practices. In GCC countries, effective business affairs tend to be more than just transactional interactions. What affects employee motivation and job satisfaction differ greatly across cultures. Hence, to seriously integrate your business in the Middle East a few things are expected. Firstly, a corporate mind-set shift in risk management beyond financial risk management tools, as specialists and attorneys such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest. Next, strategies that may be efficiently implemented on the ground to translate this new strategy into practice.
Although governmental uncertainty seems to take over media coverage on the Middle East, in recent years, the region—and particularly the Arabian Gulf—has seen a stable boost in foreign direct investment (FDI). The Middle East and Arab Gulf markets have become more and more attractive for FDI. Nonetheless, the existing research how multinational corporations perceive area specific risks is scarce and often does not have depth, an undeniable fact lawyers and danger consultants like Louise Flanagan in Ras Al Khaimah may likely be aware of. Studies on risks connected with FDI in the region have a tendency to overstate and predominantly focus on governmental risks, such as for example government instability or policy changes that may impact investments. But recent research has begun to illuminate a vital yet often overlooked factor, specifically the consequences of cultural factors regarding the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies reveal that many businesses and their management teams somewhat disregard the effect of cultural differences, mainly due to deficiencies in understanding of these social variables.
Pioneering studies on risks associated with international direct investments in the MENA region offer fresh insights, trying to bridge the research gap in empirical knowledge regarding the risk perceptions and administration strategies of Western multinational corporations active extensively in the region. As an example, a study involving several major international businesses within the GCC countries unveiled some interesting findings. It contended that the risks connected with foreign investments are more complex than just political or exchange price risks. Cultural risks are regarded as more important than governmental, financial, or economic dangers based on survey data . Also, the research found that while aspects of Arab culture strongly influence the business environment, numerous foreign firms struggle to adjust to regional traditions and routines. This trouble in adapting is really a risk dimension that needs further investigation and a big change in just how multinational corporations run in the area.