Economies and businesses must factor risk management in any high growth push

Around seven decades since the discovery of oil heralded a new era for the Gulf, the UAE and Saudi Arabia are leading the way in diversifying their economies and cultivating a centre-stage role in the global economy.

The region is home to the world's largest IPO, with Saudi Aramco raising $25.6 billion and achieving a valuation of $1.7 trillion. Simultaneously, the UAE has emerged as a global fintech hub, with initiatives like DIFC and Abu Dhabi Global Market attracting startups and investment firms, reinforcing its leadership in financial innovation. These nations represent the fastest-growing economic federation globally, with Saudi Arabia becoming the first trillion-dollar economy in MENA and the UAE achieving a remarkable non-oil GDP growth of 4-10% annually over the past decade.

What lies in the future

Amid this transformation, the region offers a wealth of reasons to be inspired, from its vibrancy and immense potential to its flourishing economy. After this period of remarkable growth, the pressing question is: What lies ahead? The answer is unmistakable - we are on the cusp of an era marked by bold economic and social diversification, the emergence of new industries, technological advancements and infrastructure developments.

Governance and risk management

As with any successful commercial venture—be it at the regional or business level—following a period of efficacious growth, there is often a purposeful quantum leap required to capitalise on the momentum, build scale and achieve full potential. To secure these opportunities, a renewed focus on governance and risk management is essential.

Consequences of risk aversion

While foreign investors are drawn to regulated regions, it is essential to learn from the triumphs as well as the mistakes of other emerging economies. Misunderstanding or avoiding risk can have far-reaching consequences across regional, business and societal levels.

Recent examples from developed economies show that a culture of risk aversion stifles innovation and entrepreneurship, resulting in sluggish capital markets and diminished GDP growth. This fear of risk creates bureaucratic obstacles that hinder adaptability, suffocate decision-making, and threaten long-term prosperity. Embracing a considered approach to risk is cultivates a vibrant, dynamic economy.

Managing complex risk

In the Middle East, the interplay between investment risk, supplier risk, and geopolitical risk presents a complex challenge. While it may seem simpler and safer to avoid these risks in their entirety, doing so can obstruct strategic goals. Accepting certain risks can enable a competitive edge by tapping into foreign markets or partnerships that others might overlook due to fear of uncertainty and lack of risk expertise.

Artful risk management

By actively engaging with these risks whilst managing them within the guardrails of a well-articulated appetite, organisations can develop resilience, positioning themselves to respond swiftly to market changes. Effective risk management is an art that requires a nuanced understanding of which specific risks to accept, aligned with value chain, financial drivers, and overarching strategy.

Success relies on mastering risk management and integrating it into strategy and planning. By identifying principal risks and establishing an appropriate risk appetite, organisations can gain valuable foresight – knowing when to mitigate risks and when to embrace them.

A robust risk management strategy not only safeguards assets but also unlocks significant commercial and competitive advantages.

Strong governance and well-considered risk management at an organisational and regional level will position the Middle East as a global leader and catalyse its next growth phase. This approach will help seize opportunities, avoid pitfalls and attract capital, solidifying the region's status as a powerhouse.