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

Recent research highlights the significant role that cultural differences play in the success or of foreign investments in the Arab Gulf.

Recent scientific studies on dangers connected to international direct investments in the MENA region offer fresh insights, attempting to bridge the research gap in empirical knowledge regarding the danger perceptions and management methods of Western multinational corporations active extensively in the region. For instance, a study involving a few major worldwide companies within the GCC countries revealed some fascinating data. It argued that the risks related to foreign investments are much more complex than just political or exchange price risks. Cultural risks are regarded as more crucial than governmental, monetary, or economic risks in accordance with survey data . Furthermore, the research unearthed that while aspects of Arab culture strongly influence the business environment, many foreign businesses struggle to adapt to regional traditions and routines. This difficulty in adapting constitutes a danger dimension that requires further investigation and a big change in just how multinational corporations operate in the area.

Focusing on adjusting to local culture is important although not sufficient for effective integration. Integration is a loosely defined concept involving many things, such as for instance appreciating regional values, understanding decision-making styles beyond a restricted transactional business perspective, and looking into societal norms that influence company practices. In GCC countries, successful business interactions are far more than just transactional interactions. What influences employee motivation and job satisfaction vary greatly across countries. Hence, to truly integrate your business in the Middle East a couple of things are expected. Firstly, a corporate mindset change in risk management beyond financial risk management tools, as experts and solicitors such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest. Secondly, techniques which can be effectively implemented on the ground to translate the new mindset into action.

Although political instability seems to dominate news coverage regarding the Middle East, in recent years, the region—and specially the Arabian Gulf—has seen a stable increase in foreign direct investment (FDI). The Middle East and Arab Gulf markets are becoming more and more attractive for FDI. Nonetheless, the present research how multinational corporations perceive area specific dangers is scarce and usually does not have insights, a well known fact solicitors and risk consultants like Louise Flanagan in Ras Al Khaimah would likely be aware of. Studies on risks related to FDI in the region tend to overstate and predominantly focus on political risks, such as for instance government instability or policy changes that could affect investments. But recent research has started to shed a light on a a crucial yet often overlooked factor, particularly the consequences of social facets in the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies reveal that lots of companies and their management teams considerably disregard the impact of cultural differences, due mainly to a lack of knowledge of these cultural variables.