Risk studies have primarily focused on political risks, frequently overlooking the critical effect of social variables on investment sustainability.
Although political instability appears to dominate news coverage on the Middle East, in recent years, the region—and particularly the Arabian Gulf—has seen a stable increase in international direct investment (FDI). The Middle East and Arab Gulf markets are becoming increasingly appealing for FDI. Nevertheless, the prevailing research on what multinational corporations perceive area specific risks is scarce and frequently lacks insights, a fact lawyers and danger experts like Louise Flanagan in Ras Al Khaimah would probably be aware of. 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 vital 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 administration teams considerably overlook the impact of cultural differences, due primarily to a lack of knowledge of these social factors.
Working on adjusting to local traditions is necessary yet not enough for successful integration. Integration is a loosely defined concept involving a lot of things, such as for example appreciating regional values, understanding decision-making styles beyond a restricted transactional business viewpoint, and looking at societal norms that influence business practices. In GCC countries, successful business affairs are more than just transactional interactions. What affects employee motivation and job satisfaction differ significantly across cultures. Thus, to genuinely incorporate your business in the Middle East a few things are needed. Firstly, a corporate mind-set change in risk management beyond monetary risk management tools, as consultants and lawyers such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest. Secondly, techniques that may be effortlessly implemented on the ground to convert this new approach into practice.
Recent studies on dangers connected to international direct investments in the MENA region offer fresh insights, trying to bridge the research gap in empirical knowledge regarding the risk perceptions and management strategies of Western multinational corporations active widely in the region. As an example, research project involving a few major worldwide companies in the GCC countries revealed some interesting findings. It argued that the risks associated with foreign investments are more complicated than simply political or exchange price risks. Cultural risks are regarded as more crucial than governmental, economic, or financial dangers based on survey data . Also, the research unearthed that while elements of Arab culture strongly influence the business environment, numerous foreign organisations find it difficult to adjust to regional traditions and routines. This trouble in adapting is really a danger dimension that needs further investigation and a big change in exactly how multinational corporations run in the area.