Geopolitical tensions will encourage companies to move certain operations

Companies must be mindful of an evolving regulatory picture in the Middle East and an increased focus on ESG performance

The increased geopolitical tension that is expected to last into the beginning of 2024 will likely prompt many companies in the Middle East and North Africa to continue to examine options for bringing parts of their business operations closer to home to minimise supply-chain concerns and be able to have greater control. 

Conversely, the effect of geopolitical risks on the economies of particular jurisdictions in MENA might result in some companies seeking to redomicile elsewhere within the region, should hard currency and free-flow of capital become problematic. 

Continuing a trend that began before the COVID-19 pandemic, but which was exacerbated by it, many companies are seeking to bring manufacturing closer to their home country to reduce exposure to the effects of geopolitical tension. And governments, including that of the United Arab Emirates, have put in place various incentives to encourage businesses to move operations that might previously have been overseas, back to the region.

Global companies with operations in MENA may also examine moving operations within the region, because of various regulatory and political factors. For example, Saudi Arabia’s Regional Headquarters programme is aimed at encouraging global companies to relocate their MENA headquarters to the kingdom. 

As they move within or bring operations back to the MENA region, however, companies must be aware of a dynamic regulatory environment and an increasing focus on the Environmental, Social & Governance (ESG) performance of companies.

Greater regulatory focus in areas such as anti-money laundering means that there is a slew of legal changes that companies will need to be abreast of. 

As companies move operations, there are myriad insurance considerations. Not only are there changing supply-chain factors and a potentially altered risk profile, companies must be aware of the differing legal and regulatory systems across the MENA region and ensure they are compliant and exhibiting best practice.