The rise of risk intelligence and scenario-planning functions

(Translation generated automatically)

Nessrine Ferhat (BBA 03) has been based in Saudi Arabia since 2006 and works at the intersection of private capital, strategy and cultural intelligence. She supports investors, public authorities and entrepreneurs in complex environments, drawing on a detailed understanding of local dynamics, institutions and ecosystems of influence. A French Foreign Trade Advisor, she co-chairs the ESSEC Alumni Saudi Arabia & Bahrain Chapter.

You know the Middle Eastern market well. How is today’s geopolitical context forcing companies to rethink the way they enter this market?

What I observe is that companies no longer enter the Middle East from a hub: they now enter it through a system. Three converging forces are making this necessary, and they will intensify over the next eighteen to twenty-four months.

The first is the regionalisation of value chains. The IMF, in its October 2024 Regional Economic Outlook for MENA, and HSBC Global Research document the densification of what are now known as Asia-Gulf “capital corridors”: China-Gulf, India-Gulf and Southeast Asia-Gulf investment flows account for a growing share of new capital mobilised in the region.
For a European company, this means that competition has widened to include Asian players that are often better positioned on price, execution time and, in some cases, technology transfer.
 Over the next two years, this competitive benchmark is likely to become the reference point.

The second force is economic sovereignty elevated to a doctrine of state.
The Saudi RHQ programme, which since 1 January 2024 has made access to public procurement conditional on establishing a regional headquarters in Riyadh, is not a regulatory detail: it is a paradigm shift.
In Bahrain, Economic Vision 2030 reflects the same logic of local preference and skills transfer at Kingdom level.
 In the Emirates, Emiratisation imposes quotas for nationals in the private sector. Market entry is therefore no longer a legal question — setting up an LLC — but a question of footprint: what local added value, what skilled jobs, what alignment with the PIF, Mumtalakat, Mubadala or ADQ, recently renamed Imad.

The third force is regional instability becoming a continuous variable. Since October 2023, Gulf geopolitical risk premia have been read differently by risk committees. Attacks on commercial traffic in the Red Sea have, at certain points, reduced traffic through the Suez Canal by more than half, as documented by the BIS Quarterly Review for the first quarter of 2024. The Iran-Saudi rapprochement of March 2023, mediated by Beijing, redrew the security equation. The pause in the Riyadh-Tel Aviv normalisation dynamic, developments in Yemen and discussions around a US-Saudi strategic agreement are all factors that can no longer be neutralised in a standard country note: they are now built into financial modelling itself.

In practical terms, and this is where the near future will be decided, I already see three operational consequences that will become more pronounced. 

Pre-investment phases, which used to take six months, now take twelve to eighteen, because companies need to document shock resilience and not merely potential. Joint ventures with sovereign entities are becoming the default vehicle, where a wholly owned subsidiary used to be the reflex. Investment committees now include contingent clauses on the evolution of regional security. What may look like procedural heaviness is in reality a higher quality threshold, and it will favour players that invest early in local substance.

Through Ankaa Partners, you facilitate investment and the establishment of international companies in the region. What forms of adaptation do you now consider essential for long-term success in such a fast-moving environment?

Four dimensions now seem non-negotiable to me. I read them through McKinsey’s “localisation 2.0” framework, which distinguishes peripheral adaptation — language, packaging, pricing — from structural adaptation, which concerns governance, capital, talent and the supply chain, while adding the Gulf’s specific geopolitical dimension.

The first dimension is governance. 

A regional entity run from Paris or London, with a country General Manager who has no real authority, is no longer a viable option. Local regulators — SAMA in Saudi Arabia, the Central Bank of Bahrain, the FSRA at ADGM, the DFSA at the DIFC — observe who is really making decisions and penalise façade structures.
 PwC, in its Middle East Financial Services Insights 2024, notes that authorisations granted to foreign groups in 2023-2024 were, in the majority of cases, conditional on an upgrade of regional governance. This requirement will become stricter over the next twenty-four months.

The second dimension is partnership capital. The PIF, whose assets under management exceeded 925 billion dollars according to the Sovereign Wealth Fund Institute in summer 2024, with a target of 2 trillion dollars by 2030, is no longer a prestige shareholder: it is an execution accelerator. Across sectors — mainly construction, energy, technology, logistics, retail and hospitality — structuring a joint venture with a sovereign fund or strategic family office provides access to land, administrative execution speed and legitimacy across the distribution chain that cannot be obtained otherwise.
 Conversely, the absence of such a partnership can result in a measurable loss of competitive tempo.

The third dimension is the reading of human capital. The senior talent market in Riyadh is probably, for certain profiles — investment banking, asset management, luxury retail, high-end hospitality — one of the tightest in the world today. According to the EY GCC Wealth & Asset Management 2024 report, total remuneration for senior executives in asset management in Riyadh rose at a pace significantly above that observed in Dubai or Doha over the 2022-2024 period. The strategic consequence is clear: an entry plan that underestimates this war for talent fails within twelve months.

The fourth dimension, and the one most often neglected, is institutional and cultural reading. The Gulf is not a bloc. Riyadh operates over long timeframes and often pyramidal decisions, followed by accelerated execution cycles. Bahrain operates through relational finesse, regulatory openness and a more compact ecosystem. Abu Dhabi favours institutional verticalisation. Doha is highly selective. An entry strategy that treats these capitals as interchangeable fails, because decision-making codes are not transferable.

What will distinguish groups that are durably established from those that fall behind, in my view, is their ability to treat these four dimensions as an ongoing discipline, not as an entry project to be closed once the subsidiary has been created. 

From Riyadh, what do you currently find most striking in the way companies are adapting to a more unstable geopolitical environment?

Three observations strike me in particular.

The first is the disappearance of the opposition between “Dubai for the region” and “Riyadh for the Saudi market”. For nearly fifteen years, the strategic question for an international group was simple: which regional hub to choose? Today, under the combined effect of the RHQ programme, the depth of the Saudi market — non-oil GDP is expected to grow by 4 to 4.5% in 2025-2026 according to the IMF Article IV published in July 2024, compared with a global average of around 3.2% — and the concentration of public tenders, the question has become entirely different: what multi-polar architecture should be built? Many groups are now structuring a Riyadh-Abu Dhabi-Doha presence with distributed functions, rather than a single headquarters.

The second observation is the rise of risk intelligence and scenario-planning functions. What was previously the preserve of energy or defence majors has become a reflex for financial services, construction, logistics and transport, agrifood, high-end retail and hospitality.
 Strategy departments now integrate internal or external teams producing twelve- or twenty-four-month scenarios on a number of critical variables: the trajectory of Fed rates and their impact on the Saudi riyal or Emirati dirham peg, the evolution of the Red Sea risk premium, the dynamics of crude prices around 80-85 dollars, while Saudi Arabia’s fiscal breakeven sits, according to the IMF, at around 95 to 100 dollars, and the trajectory of the Iranian issue. These scenarios now feed directly into capex and inventory decisions.

The third observation is what I call the learning of capital agility, and it cuts across sectors. In financial services, the most visible shift has been the repositioning of wealth management and asset management capabilities, historically linked to the Levant and offshore Switzerland, towards Manama and Abu Dhabi, while major international investment banks moved origination, sukuk syndication and corporate coverage teams to Riyadh under the effect of the RHQ programme.

In construction and EPC, international majors have rapidly redeployed their human and material capabilities between giga-projects — NEOM, Diriyah, Red Sea, Qiddiya, Riyadh metro extensions, Saudi Land Bridge — depending on the resequencing of phases by project owners, and the subcontracting ecosystem has been recomposed in favour of South Korean, Chinese and Indian players, as documented by Deloitte in its Middle East Construction Outlook 2024. In agrifood, Saudi Arabia’s food security strategy, driven in particular by SALIC and complemented by ADQ and Mubadala’s positions in the Emirates in international agricultural trading, has accelerated verticalisation and diversification of origins, from cereals to animal proteins; the IMF, in its October 2024 Regional Economic Outlook for MENA, and the FAO document the scale of these sovereign investments.

In logistics, finally, the picture has hardened in two stages. The Red Sea shock — Suez Canal traffic down by more than half during certain periods of the first quarter of 2024, container freight rates multiplied by two to three according to the BIS Quarterly Review and the Drewry World Container Index — had already imposed a first shift in flows towards ports on the Saudi east coast (Dammam, Jubail), Oman (Sohar, Salalah) and Bahrain (Khalifa Bin Salman Port), and gave an unexpected dimension to the Saudi Global Supply Chain Resilience Initiative.
 The ongoing conflict between the United States and Iran, and the resulting disruption to the Strait of Hormuz, adds a second and far larger wave: according to the US Energy Information Administration and the International Energy Agency, Hormuz accounts for nearly one fifth of global oil trade and almost all hydrocarbon exports from the Gulf; its closure, even partial, affects energy flows, Qatari LNG and the entire regional container logistics system simultaneously.

Geographically, the map is reversing. Ports on the Saudi and Bahraini east coast, perceived in 2024 as refuges from the Red Sea, have themselves become exposed points. Conversely, capacities located downstream of Hormuz — Sohar, Salalah and Duqm in Oman, Fujairah in the Emirates — are capturing surplus traffic and storage, while the Saudi terminals of Yanbu and Jeddah are regaining strategic centrality despite the persistent Red Sea risk premium.
 Pipeline bypass infrastructure is once again becoming a first-order lever: Saudi Arabia’s East-West Pipeline, Petroline, which links the east of the Kingdom to Red Sea terminals, and the Habshan-Fujairah pipeline in the Emirates are operating at full capacity.

The Saudi Land Bridge railway, which is intended to connect the east coast to the west coast, has become one of the most closely watched infrastructure projects of the decade. Over the next eighteen to twenty-four months, Saudi Arabia’s ambition to rank among the world’s top 10 in the World Bank Logistics Performance Index by 2030 is now functioning as a heavy capital signal that international players are interpreting in real time; we should see a rapid consolidation of positions among those that have been able to pivot towards a multi-port and multimodal architecture, and a very sharp decline among those that remain dependent on a single corridor.

What distinguishes these shifts, and what strikes me most from Riyadh, is that they are now measured in weeks, not in three-year plans. And adaptation is not experienced as a constraint: it is experienced as the very condition of performance.

 The Middle East is often perceived from the outside through the lens of its tensions. On the ground, do you instead see companies learning to turn this instability into a capacity for anticipation and adjustment?

Yes, without hesitation. And it is probably one of the most instructive gaps between external perception and operational reality.

The macro framing is, in this respect, unambiguous. The World Bank, in its spring 2024 Gulf Economic Update, stresses that GCC economies absorbed the post-Covid inflationary shock with less intensity than most OECD countries: Saudi inflation remained around 1.5 to 2% in 2024, and Bahraini inflation below 1%.  This is not insignificant: it reveals macroeconomic systems with absorption capacities — dollar pegs, high foreign-exchange reserves, countercyclical sovereign wealth funds — which are, paradoxically, regional stabilisers in a more volatile world.

At company level, what I observe is a shift from a logic of resilience — absorbing the shock and restoring the previous operation — to one of active anticipation.

In financial services, Saudi open banking, for which SAMA published the operational framework in 2023-2024, was very quickly seized upon by regional and international fintechs, which understood that the regulatory window offered a first-mover advantage; according to HSBC Global Research and Saudi Payments, the Saudi digital payments market has been growing at a double-digit annual rate for three years. In premium retail and luxury, the liberalisation of Saudi tourism —
the e-visa launched in 2019, the target of 150 million annual visitors by 2030 according to the Ministry of Tourism, with more than 100 million reached as early as 2023 — has opened up a considerable market, and the houses that positioned their flagships, relationship management teams and stocks in Riyadh, Jeddah, AlUla and soon Diriyah are building a lead that will be difficult to close.
 In hospitality, operators that signed early with the PIF, the Diriyah Gate Development Authority, Roshn or Red Sea Global, despite the initial contractual complexity, are now securing positions on a pipeline of more than one million rooms by 2030, according to Knight Frank and public data from the Ministry of Tourism.

In this framework, instability becomes a signal: it forces decision-making rather than wait-and-see behaviour. It is not positive in itself — it is not — but it creates a sorting effect between players that invest in their capacity to adapt and those that remain in an observer posture. 

Over the next eighteen to twenty-four months, this sorting effect will become even clearer.

Do you feel that the current context is pushing international companies to fundamentally rethink their approach to a market such as Saudi Arabia — no longer merely as an opportunity, but as a strategic environment that must be understood in depth?

That is indeed the central shift, and it is under way. Saudi Arabia is no longer treated as a market — that is, an aggregate of commercial opportunities — but as a system: a political, economic, institutional and cultural system, every component of which must be read in its own right.

The PwC Middle East CEO Survey 2024 documents this clearly: the share of international executives placing Saudi Arabia in their top three strategic markets over a three-to-five-year horizon increased significantly between 2022 and 2024. But what is even more significant is the change in the criteria themselves: executives no longer mention only market size or non-oil growth, which of course remain key, but now also cite the predictability of public programmes, the quality of execution of giga-projects, the depth of the capital market and the strength of partnerships with sovereign entities.

Three realisations run through this movement, all of them with prospective significance.
 The first is that Saudi temporality is neither Western nor Asian: it combines a long framing phase with rapid execution once the direction has been set. Leaders who think in quarters miss the first movement; those who agree to invest eighteen to twenty-four months in understanding the ecosystem — institutions, funds, ministries, family offices, platforms such as the Future Investment Initiative — give themselves the means to execute quickly afterwards.

The second is that Saudi Arabia has also become a capital market. Tadawul now ranks, by capitalisation, among the world’s top ten stock exchanges; the Saudi sovereign bond market is one of the most active among emerging markets; Saudi family offices, whose private wealth is estimated by Boston Consulting Group at several hundred billion dollars, have become global allocators. For French groups, this opens up a question that was not being asked ten years ago: is Saudi Arabia a client market, a capital market, or both? The strategic answer is obviously not the same in each case.

The third is that institutional reading has become a competitive asset in its own right. Understanding the articulation between the Royal Court, the Council of Ministers, the PIF, the Ministry of Investment, SAMA, the Capital Market Authority and the Authority for Statistics is no longer a “political” skill: it is a strategic one. Groups that invest in local advisory boards, in academic collaborations with KAUST, KFUPM or King Saud University, and in cultural partnerships — the Royal Commission for AlUla, the Diriyah Biennale Foundation, the Misk Foundation — equip themselves with a fine-grained reading that standard country notes do not provide.

Saudi Arabia rewards depth of understanding, and it penalises superficiality very quickly.

More broadly, does what you observe from Saudi Arabia and Bahrain seem to reveal a wider evolution in international trade, where agility, contextual understanding and adaptability are becoming as important as the offer itself?

That is exactly how I read it, and I believe the Gulf is, in many respects, an advanced laboratory for a transformation we will see unfold across international trade over the coming decade.

The McKinsey Global Institute, in “Global flows: The ties that bind in an interconnected world”, published in January 2024, documents a reality that contradicts the simplistic narrative of deglobalisation: global flows have not declined, they have reconfigured. More regionalised, more polarised, more conditioned by political considerations — sanctions, export controls, local content — they are shifting towards services, data and intellectual property. 

In this context, a company’s competitive advantage is shifting. It no longer lies solely in the intrinsic quality of its offer, which of course remains a prerequisite; it also lies in its ability to read the operating context, reconfigure value chains, structure local partnerships and arbitrate between markets in real time. 

Why is the Gulf on the front line of this transformation? Four reasons, in my view. First, because local regulators are driving a proactive institutional transformation that forces companies to rethink their regional architecture every eighteen to twenty-four months. Second, because the depth of public capital — PIF, ADIA, Mubadala, ADQ, QIA, Mumtalakat — makes sovereign players strategic counterparties, not mere observers.
Third, because the region’s geographical centrality, between Asia, Africa and Europe, exposes it to global turbulence and forces it to internalise adaptive capabilities that other markets can still avoid.
 Finally, because the time horizon of the transformations under way, ten or fifteen years, forces companies to move beyond short-term logic.

What companies are learning here today — fine institutional reading, capital flexibility, scenario discipline, investment in local substance — will, I believe, be what they need to learn everywhere over the coming decade.
 The Gulf is a laboratory, and as such it deserves the attention not only of executive committees, but also of the schools training tomorrow’s leaders. Such as ESSEC.

Interview: François de Guillebon