The Middle East is attracting global investment, especially the Gulf region. Find out more about risk management in the gulf.

Much of the present academic work on risk management strategies for multinational corporations illustrates particular uncertainties but omits uncertainties that are tough to quantify. Certainly, lots of research within the international management field has focused on the management of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the risk factors for which hedging or insurance instruments could be developed to mitigate or transfer a firm's danger visibility. Nonetheless, current 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 methods on the firm level within the Middle East. In one research after gathering and analysing data from 49 major international companies that are active in the GCC countries, the authors discovered the following. Firstly, the risk associated with foreign investments is actually a great deal more multifaceted compared to the often analyzed factors of political risk and exchange rate visibility. Cultural danger is regarded as more essential than political risk, economic risk, and economic danger. Secondly, even though elements of Arab culture are reported to have a strong impact on the business environment, most firms battle to adapt to local routines and traditions.

This social dimension of risk management calls for a shift in how MNCs do business. Adapting to regional traditions is not just about being familiar with company etiquette; it also requires much deeper social integration, such as for instance appreciating regional values, decision-making styles, and the societal norms that affect company practices and employee behaviour. In GCC countries, successful company relationships are made on trust and personal connections instead of just being transactional. Also, MNEs can reap the benefits of adapting their human resource administration to reflect the cultural profiles of local workers, as factors affecting employee motivation and job satisfaction vary widely across cultures. This calls for a change in mind-set and strategy from developing robust economic risk management tools to investing in cultural intelligence and local expertise as consultants and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

In spite of the political uncertainty and unfavourable economic climates in some elements of the Middle East, international direct investment (FDI) in the area and, specially, within the Arabian Gulf has been progressively increasing within the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the associated risk is apparently important. Yet, research regarding the risk perception of multinationals in the region is lacking in volume and quality, as specialists and lawyers like Louise Flanagan in Ras Al Khaimah would probably attest. Although various empirical research reports have investigated the effect of risk on FDI, many analyses have largely been on political risk. However, a brand new focus has emerged in present research, shining a spotlight on an often-disregarded aspect specifically cultural facets. In these groundbreaking studies, the researchers pointed out that businesses and their management frequently really disregard the effect of social facets because of a not enough knowledge regarding cultural variables. In reality, some empirical studies have unearthed that cultural differences lower the performance of international enterprises.