Understanding the risks of FDI in the Middle East and Asia

Understanding the risks of FDI in the Middle East and Asia

Blog Article

Risk research reports have primarily concentrated on governmental risks, frequently overlooking the critical impact of cultural variables on investment sustainability.

Recent studies on risks associated with foreign direct investments in the MENA region offer fresh insights, trying to bridge the research gap in empirical knowledge concerning the danger perceptions and administration methods of Western multinational corporations active widely in the region. As an example, a study involving several major international companies in the GCC countries revealed some interesting findings. It argued that the risks associated with foreign investments are more complex than just political or exchange rate risks. Cultural risks are perceived as more important than political, financial, or economic risks according to survey data . Furthermore, the study found that while aspects 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 constitutes a risk dimension that requires further investigation and a change in how multinational corporations run in the region.

Although political instability seems to take over news coverage regarding the Middle East, in recent years, the region—and particularly the Arabian Gulf—has seen a steady increase in foreign direct investment (FDI). The Middle East and Arab Gulf markets have become rapidly appealing for FDI. Nonetheless, the present research on what multinational corporations perceive area specific risks is scarce and often does not have insights, an undeniable fact attorneys and risk consultants like Louise Flanagan in Ras Al Khaimah would likely know about. Studies on dangers connected with FDI in the area tend to overstate and predominantly focus on political risks, such as for example government uncertainty or policy changes that could affect investments. But lately research has started to illuminate a crucial yet often overlooked factor, specifically the effects of social facets on 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, mainly due to too little knowledge of these cultural factors.

Focusing on adjusting to local traditions is essential although not enough for effective integration. Integration is a loosely defined concept involving many things, such as for example appreciating local values, understanding decision-making styles beyond a restricted transactional business perspective, and looking at societal norms that influence company practices. In GCC countries, successful business connections are more than just transactional interactions. What influences employee motivation and job satisfaction differ greatly across countries. Thus, to seriously integrate your business in the Middle East a few things are essential. Firstly, a business mind-set shift in risk management beyond economic risk management tools, as consultants and solicitors such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely recommend. Secondly, methods that may be effortlessly implemented on the ground to translate this new approach into action.