Understanding the risks of FDI in the Middle East and beyond

Understanding 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.

Pioneering scientific studies on risks associated with international direct investments in the MENA region offer fresh insights, attempting to bridge the research gap in empirical knowledge regarding the risk perceptions and administration methods of Western multinational corporations active extensively in the region. As an example, a study involving a few major worldwide companies in the GCC countries unveiled some fascinating findings. It contended that the risks connected with foreign investments are more complicated than simply political or exchange rate risks. Cultural risks are perceived as more crucial than governmental, financial, or economic dangers in accordance with survey data . Furthermore, the study unearthed that while elements of Arab culture strongly influence the business environment, many foreign companies find it difficult to adjust to local customs and routines. This trouble in adapting is really a danger dimension that requires further investigation and a big change in how multinational corporations run in the region.

Working on adjusting to local traditions is important but not adequate for successful integration. Integration is a loosely defined concept involving several things, such as for example appreciating local values, understanding decision-making styles beyond a limited transactional business perspective, and looking into societal norms that influence company practices. In GCC countries, effective business affairs are far more than just transactional interactions. What influences employee motivation and job satisfaction vary greatly across cultures. Therefore, to genuinely incorporate your business in the Middle East a few things are expected. Firstly, a business mind-set change in risk management beyond monetary risk management tools, as consultants and lawyers such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest. Secondly, techniques that may be efficiently implemented on the ground to convert this new strategy into practice.

Although political uncertainty appears to take over media coverage on the Middle East, in recent times, the region—and particularly the Arabian Gulf—has seen a steady increase in foreign direct investment (FDI). The Middle East and Arab Gulf markets are becoming increasingly attractive for FDI. However, the existing research on how multinational corporations perceive area specific dangers is scarce and usually does not have insights, an undeniable fact attorneys and risk experts like Louise Flanagan in Ras Al Khaimah may likely be aware of. Studies on risks associated with FDI in the area have a tendency to overstate and mostly focus on political risks, such as government uncertainty or policy modifications that may impact investments. But recent research has started to shed a light on a a crucial yet often overlooked factor, specifically the effects of cultural facets regarding the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that lots of companies and their administration teams somewhat brush aside the effect of cultural differences, due mainly to a lack of understanding of these social factors.