While the Middle East turns into a more attractive location for FDI, comprehending the investment risks is increasingly important.
Although governmental instability appears 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 are becoming increasingly attractive for FDI. Nonetheless, the prevailing research on how multinational corporations perceive area specific risks is scarce and frequently does not have insights, a well known fact lawyers and risk professionals like Louise Flanagan in Ras Al Khaimah would probably be aware of. Studies on risks related to FDI in the area have a tendency to overstate and mostly concentrate on political risks, such as for instance government uncertainty or policy modifications that may influence investments. But lately research has started to illuminate a critical yet often overlooked aspect, namely the effects of social factors regarding the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that many companies and their management teams dramatically overlook the impact of cultural differences, due primarily to too little understanding of these cultural factors.
Recent scientific studies on dangers connected 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 methods of Western multinational corporations active extensively in the area. For example, research project involving several major worldwide businesses within the GCC countries unveiled some fascinating data. It contended that the risks related to foreign investments are a lot more complex than simply political or exchange price risks. Cultural risks are perceived as more important than governmental, economic, or economic risks according to survey data . Additionally, the research found that while elements of Arab culture strongly influence the business environment, numerous foreign businesses find it difficult to adjust to regional customs and routines. This difficulty in adapting constitutes a danger dimension that will require further investigation and a big change in just how multinational corporations operate in the region.
Working on adjusting to local culture is essential yet not sufficient for successful integration. Integration is a loosely defined concept involving numerous things, such as for example appreciating local values, learning about decision-making styles beyond a restricted transactional business viewpoint, and looking at societal norms that influence business practices. In GCC countries, effective business interactions are more than just transactional interactions. What affects employee motivation and job satisfaction vary significantly across countries. Therefore, to truly incorporate your business in the Middle East a couple of things are needed. Firstly, a business mind-set shift in risk management beyond financial risk management tools, as professionals and lawyers such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest. Next, strategies that can be efficiently implemented on the ground to translate this new strategy into practice.