Looking at Supply Chain Risk Like an Insurance Provider: Do Business Here, Not There

It would be great to have a supply chain risk silver bullet that highlighted specific suppliers that present riskier prospects. That would be financial risk variables, broader supply chain exposure, political risk (of site/factory/host countries), and more. Short of this risk management panacea or expensive one-off analysis, the 2014 FM Global Resilience Index is a fascinating starting point, at least as it pertains to both country specific risk and the overall factors that contribute to supply chain risk (see our initial coverage of these variables).

A number of variables jump out from the study. First, a number of European countries do extremely well overall (i.e., companies and suppliers operating in these specific nations are likely to have lower risk). Norway leads the results (not surprising giving the oil reserves and lack of dependence!). Switzerland takes second place and “achieves the top spot for supply chain factors … [and] the country scores very highly on the control of corruption, extensive and efficient infrastructure, and the quality of local suppliers.” Ireland, Canada, and Australia round out the top five of the list.

But who is at the bottom? The answer: many countries in which you likely have lower-tier suppliers doing business. This includes the Philippines (14th from the bottom). Bolivia, Mauritania, Kyrgyz Republic, Venezuela, and the Dominican Republic round out the bottom of the list. But it’s other high-risk countries in which many supply chains extend into that are cause for concern. These include China (various rankings – I’ll explain this in a subsequent post), Mexico (59th overall), Russia (79th overall), Vietnam (100th overall), Indonesia (106th overall), India (112th overall) and the Philippines (117th overall).

What does this mean as far as recommendations for prioritizing supply chain risk management investments? Stay tuned for the next installments in this series.

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