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 primarily concentrated on governmental dangers, often overlooking the critical impact of social variables on investment sustainability.

Although governmental instability generally seems to take over media coverage on the Middle East, in recent years, the region—and specially the Arabian Gulf—has seen a steady upsurge in international direct investment (FDI). The Middle East and Arab Gulf markets are becoming rapidly appealing for FDI. Nevertheless, the existing research how multinational corporations perceive area specific risks is scarce and often does not have depth, a fact solicitors and risk consultants like Louise Flanagan in Ras Al Khaimah would probably be familiar with. Studies on dangers related to FDI in the region have a tendency to overstate and predominantly concentrate on governmental risks, such as for example government instability or policy modifications which could affect investments. But lately research has started to shed a light on a a vital yet often overlooked aspect, namely the consequences of cultural facets regarding the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies reveal that numerous companies and their administration teams significantly overlook the impact of cultural differences, due primarily to deficiencies in understanding of these social variables.

Focusing on adjusting to local traditions is important not sufficient for successful integration. Integration is a loosely defined concept involving several things, such as appreciating regional values, understanding decision-making styles beyond a restricted transactional business viewpoint, and looking into societal norms that influence company practices. In GCC countries, successful business connections are far more than just transactional interactions. What affects employee motivation and job satisfaction differ greatly across countries. Therefore, to seriously integrate your business in the Middle East a few things are essential. Firstly, a business mindset change in risk management beyond financial risk management tools, as consultants and attorneys such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest. Next, strategies that may be effortlessly implemented on the ground to translate this new approach into action.

Recent scientific studies on risks connected to foreign direct investments in the MENA region offer fresh insights, attempting to bridge the research gap in empirical knowledge concerning the danger perceptions and management techniques of Western multinational corporations active extensively in the region. For example, a study involving a few major worldwide companies within the GCC countries revealed some interesting data. 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 risks in accordance with survey data . Furthermore, the study discovered that while elements of Arab culture strongly influence the business environment, many foreign companies struggle to adjust to regional traditions and routines. This difficulty in adapting constitutes a risk dimension that will require further investigation and a change in how multinational corporations run in the region.