The Middle East is attracting global investment, particularly the Gulf area. Learn more about risk management within the gulf.

A lot of the present literature on risk management strategies for multinational corporations features particular uncertainties but omits uncertainties that are hard to quantify. Certainly, plenty of research within the worldwide administration field has centered on the management of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the danger variables which is why hedging or insurance instruments can be developed to mitigate or transfer a company's danger exposure. However, recent studies have brought some fresh and interesting insights. They have sought to fill part of the research gaps by giving empirical information about the risk perception of Western multinational corporations and their management strategies on the company level within the Middle East. In one research after collecting and analysing information from 49 major international companies which are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk connected with foreign investments is actually even more multifaceted than the frequently examined factors of political risk and exchange rate visibility. Cultural danger is perceived as more crucial than political risk, financial risk, and financial risk. Secondly, even though aspects of Arab culture are reported to really have a strong influence on the business environment, most firms battle to adapt to local routines and traditions.

This social dimension of risk management calls for a change in how MNCs run. Conforming to local traditions is not just about understanding company etiquette; it also involves much deeper social integration, such as for example appreciating regional values, decision-making styles, and the societal norms that influence company practices and employee conduct. In GCC countries, successful business relationships are made on trust and individual connections rather than just being transactional. Additionally, MNEs can take advantage of adapting their human resource management to reflect the social profiles of local workers, as variables influencing employee motivation and job satisfaction differ widely across cultures. This calls for a shift in mind-set and strategy from developing robust financial risk management tools to investing in cultural intelligence and regional expertise as experts and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

Regardless of the political uncertainty and unfavourable economic climates in certain areas of the Middle East, international direct investment (FDI) in the region and, specially, into the Arabian Gulf has been progressively increasing over the past 20 years. The relevance of the Middle East and Gulf markets is growing for FDI, and the linked risk appears to be important. Yet, research regarding the risk perception of multinationals in the region is lacking in quantity and quality, as professionals and lawyers like Louise Flanagan in Ras Al Khaimah may likely attest. Although various empirical research reports have investigated the effect of risk on FDI, many analyses have been on political risk. However, a new focus has surfaced in current research, shining a limelight on an often-disregarded aspect namely cultural variables. In these pioneering studies, the authors noticed that businesses and their administration often seriously disregard the effect of social facets due to a not enough knowledge regarding social factors. In fact, some empirical studies have unearthed that cultural differences lower the performance of international enterprises.