Future Proofing of Defense and Security Companies in the Middle East

In a rapidly evolving geopolitical landscape, where significant ongoing regional tensions, conflicts, internal-security threats and rivalries abound, the Defense and Security (D&S) sector in the Middle East faces some unique challenges and opportunities.

Global economic trends such as inflation and supply chain disruption are also affecting the cost and availability of military equipment for customers and end-users in the region. Furthermore, climate change concerns are impacting the region and generating new security considerations including resource scarcity, thus influencing regional D&S strategies and procurement.

To further understand the current risks and strategies for future-proofing D&S businesses in the Middle East, we conducted a focused survey and interviews with 20 top D&S industry leaders in the region. This whitepaper consolidates their insights into a strategic framework for resilience and growth.

What are the most significant perceived risks?

Geopolitical and Policy Changes

Leaders consistently highlighted the unpredictability of geopolitical dynamics and shifting national policy shifts as a primary risk. This includes potential disruptions due to diplomatic tensions, changes in defense spending, and regulatory shifts.

Rising Competition

The D&S sector in the Middle East is increasingly competitive with the entry of non-traditional players like South Korea, and local entities such as Edge and SAMI, challenging established Western firms. Saudi Arabia and the UAE continue to develop their homegrown defense industries, aiming to reduce their reliance on foreign arms and equipment manufacturers by partnering with some of their own top suppliers to nurture local expertise and capabilities. Organizations such as Edge and SAMI are well funded, agile and early-adopters and nascent developers of disruptive defense technologies, thus mitigating the constraints of defense import restrictions. 

Talent Shortage

The continuing scarcity of local skilled talent creates a significant risk, which is crucial for building indigenous capabilities and reducing reliance on foreign expertise. Whilst the regional talent pool is relatively mature across several D&S sub-sectors such as land systems, shipbuilding, munitions, and aerospace MRO, especially in functions such as program management, regional business development, there is a skills-gap in domains such as UAV, smart-weapons, cyber, AI and space systems.  

Technological and Industrial Gaps

Whilst there is substantial, increasing investment in technology (notably to address cyber warfare, drone/unmanned platforms and missile defense systems) and numerous great examples of locally developed, leading edge D&S technologies, the region is still further developing the D&S industrial base, and technological capabilities required for true and sustainable global competition.

Supply Chain Vulnerabilities

Dependency on international supply chains exposes the Middle East’s D&S sector to global disruptions, necessitating a focus on building resilient, nascent supply chain ‘ecosystems.’

Strategies for Future Proofing Businesses

Strategic Recommendations

1. Enhance Policy Engagement: Improve and deepen engagement with policymakers to navigate and influence regulatory changes.
2. Strengthen Local Talent Development: Partner with educational institutions and related entities to develop a sustainable local talent pipeline.
3. Prioritize Cybersecurity: Invest in advanced cybersecurity measures to protect critical data and infrastructure.
4. Foster Collaborative Innovation: Encourage joint ventures and partnerships to drive innovation and technological advancement.
5. Build Supply Chain Resilience: Develop local supply chains and incorporate redundancy to ensure continuity during disruptions.
6. Human Capital ‘Laser Focus’: Adhere to a well-defined competency framework for hiring, developing and retaining talent who can thrive in the region, and possess the right profile and qualities to succeed in environments that require agility, cultural-adaptability, the ability to gain a deep understanding of the user-requirement and evolving geo-political factors.
7. Plan ahead in Human Capital: Talent acquisition should not be simply reactive. Organizations should pay close attention to succession planning, proactively building a talent pipeline – utilizing constantly evolving talent mapping/scanning programs which are aligned to the long-term business strategy.  

Conclusion

D&S sector leadership in the Middle East tells us that the industry in the region is currently in a state of ‘active evolution’, driven by external pressures from regional conflicts, local initiatives to build domestic capabilities and global geopolitical shifts. The focus is increasing on balancing immediate security needs with long-term strategic goals, such as technological self-sufficiency and economic diversification.

Odgers Berndtson’s global D&S team continues to work closely with key local D&S industrial entities and their multi-national peers in the mapping, identification and attraction of local and global leading talent, as well as in critical board and leadership consulting assignments. Through our extensive ongoing engagements (at Board, Advisory and C suite levels) we gain privileged exposure to the key risks, issues and mitigation strategies described by those that we interviewed for this study.

By adopting these strategies, defense industrial organizations in the Middle East can position themselves to thrive in an uncertain future, maintaining competitiveness and resilience in a rapidly changing global environment. Having the best, most appropriate leadership culture and capabilities in place, further enabled by a committed, agile and engaged team is pivotal to the successful future-proofing the D&S sector in the Middle East.