The Middle East, specially the Arabian Gulf, has experienced a notable boost in international direct investment. Learn about the risks that companies might encounter.
Although governmental instability seems to take over news coverage on the Middle East, in recent years, the region—and specially the Arabian Gulf—has seen a steady upsurge in international direct investment (FDI). The Middle East and Arab Gulf markets are becoming increasingly appealing for FDI. Nevertheless, the existing research how multinational corporations perceive area specific risks is scarce and often does not have insights, a fact solicitors and danger experts like Louise Flanagan in Ras Al Khaimah would likely be familiar with. Studies on risks associated with FDI in the area tend to overstate and mostly focus on political dangers, such as for instance government instability or policy modifications that could influence investments. But recent research has begun to illuminate a crucial yet often overlooked aspect, namely the consequences of cultural facets on the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that many businesses and their management teams significantly brush aside the impact of cultural differences, due primarily to deficiencies in comprehension of these cultural factors.
Working on adjusting to regional culture is essential although not enough for successful integration. Integration is a loosely defined concept involving numerous things, such as for instance appreciating local values, comprehending decision-making styles beyond a limited transactional business viewpoint, and looking into societal norms that influence company practices. In GCC countries, successful business affairs are far more than just transactional interactions. What influences employee motivation and job satisfaction differ greatly across cultures. Thus, to truly integrate your business in the Middle East two things are expected. Firstly, a corporate mindset change in risk management beyond economic risk management tools, as consultants and attorneys such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest. Next, techniques that can be efficiently implemented on the ground to translate this new approach into action.
Pioneering studies on dangers linked to international direct investments in the MENA region offer fresh insights, attempting to bridge the gap in empirical knowledge regarding the risk perceptions and management techniques of Western multinational corporations active extensively in the area. For instance, research project involving a few major international businesses within the GCC countries revealed some fascinating findings. It argued that the risks related to foreign investments are a great deal more complicated than simply political or exchange rate risks. Cultural risks are perceived as more crucial than governmental, financial, or economic risks based on survey data . Moreover, the study discovered that while aspects of Arab culture strongly influence the business environment, numerous foreign businesses struggle to adapt to local customs and routines. This trouble in adapting is really a risk dimension that needs further investigation and a big change in how multinational corporations run in the area.