Learning about the risks of FDI in the Middle East and beyond

Learning about the risks of FDI in the Middle East and beyond

Blog Article

Risk studies have mainly concentrated on political dangers, usually overlooking the critical impact of cultural variables on investment sustainability.

Pioneering studies on dangers linked to foreign direct investments in the MENA region offer fresh insights, trying to bridge the gap in empirical knowledge about the danger perceptions and management techniques of Western multinational corporations active widely in the region. For example, research project involving a few major international companies within the GCC countries unveiled some interesting findings. It suggested that the risks associated with foreign investments are more complicated than simply political or exchange rate risks. Cultural risks are regarded as more essential than political, financial, or economic dangers in accordance with survey data . Furthermore, the study discovered that while elements of Arab culture strongly influence the business environment, numerous foreign firms struggle to adjust to regional customs and routines. This trouble in adapting is really a risk dimension that needs further investigation and a big change in exactly how multinational corporations operate in the area.

Working on adjusting to local traditions is important yet not enough for successful integration. Integration is a loosely defined concept involving several things, such as appreciating local values, understanding decision-making styles beyond a limited transactional business perspective, and looking at societal norms that influence company practices. In GCC countries, effective business relationships tend to be more than just transactional interactions. What impacts employee motivation and job satisfaction differ greatly across cultures. Therefore, to genuinely incorporate your business in the Middle East two things are needed. Firstly, a corporate mindset change in risk management beyond monetary risk management tools, as specialists and lawyers such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably recommend. Next, strategies that can be effectively implemented on the ground to translate the new strategy into action.

Although governmental uncertainty generally seems to take over news coverage regarding the Middle East, in recent years, the region—and specially the Arabian Gulf—has seen a stable upsurge in international direct investment (FDI). The Middle East and Arab Gulf markets have become increasingly attractive for FDI. However, the existing research on how multinational corporations perceive area specific risks is scarce and often lacks depth, a fact lawyers and risk consultants like Louise Flanagan in Ras Al Khaimah would likely be aware of. Studies on risks associated with FDI in the region have a tendency to overstate and mostly pay attention to governmental dangers, such as for instance government uncertainty or policy changes which could impact investments. But recent research has started to shed a light on a a crucial yet often overlooked factor, specifically the effects of cultural factors regarding the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that numerous businesses and their management teams dramatically neglect the impact of cultural differences, mainly due to a lack of comprehension of these social factors.