The Middle East, specially the Arabian Gulf, has experienced a notable increase in foreign direct investment. Check out the potential risks that businesses might encounter.
Focusing on adjusting to regional culture is necessary but not enough for successful integration. Integration is a loosely defined concept involving a lot of things, such as appreciating regional values, comprehending decision-making styles beyond a limited 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 vary significantly across cultures. Thus, to seriously incorporate your business in the Middle East two things are needed. Firstly, a business mindset shift in risk management beyond financial risk management tools, as consultants and solicitors such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely recommend. Next, techniques that can be effortlessly implemented on the ground to translate this new strategy into practice.
Although governmental instability generally seems to dominate news coverage regarding the Middle East, in recent times, the region—and specially the Arabian Gulf—has seen a steady upsurge in foreign direct investment (FDI). The Middle East and Arab Gulf markets have become more and more appealing for FDI. Nonetheless, the existing research on what multinational corporations perceive area specific risks is scarce and frequently lacks depth, a well known fact attorneys and danger experts like Louise Flanagan in Ras Al Khaimah would probably be familiar with. Studies on dangers associated with FDI in the area tend to overstate and predominantly pay attention to political dangers, such as government uncertainty or policy modifications which could influence investments. But recent research has begun to shed a light on a a critical yet often overlooked factor, namely the effects of social factors in the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that many businesses and their management teams notably undervalue the effect of cultural differences, due primarily to a lack of knowledge of these cultural variables.
Pioneering scientific studies on risks associated with international direct investments in the MENA region offer fresh insights, attempting to bridge the gap in empirical knowledge about the danger perceptions and management strategies of Western multinational corporations active widely in the region. For example, a study involving a few major worldwide companies in the GCC countries unveiled some fascinating data. It argued that the risks connected with foreign investments are far more complex than simply political or exchange price risks. Cultural risks are perceived as more crucial than governmental, monetary, or economic risks based on survey data . Additionally, the study found that while aspects of Arab culture strongly influence the business environment, numerous foreign organisations find it difficult to adapt to local customs and routines. This difficulty in adapting is really a danger dimension that will require further investigation and a change in how multinational corporations operate in the region.