Oil prices, exposure to natural disasters and political turmoil, including terrorism threats, were the major factors impacting a country’s business resiliency in 2015, according to the recently released FM Global Resilience Index. The index ranks 130 countries on their ability to respond to supply chain disruptions, a tool FM Global, a commercial property insurance provider, intends for companies to use to manage risk and make business decisions.
Switzerland was ranked No. 1 as the most resilient country on the index this year, thanks to things like its resilient infrastructure and for the perceived quality of its local suppliers. Norway grabbed the second spot on the index for its ability to control corruption and its positive economic activity. Norway was previously ranked at the top of the index, but declining oil prices dragged down the oil-producing country this year. Still, both countries remain an ideal business environment, according to FM Global.
“Both countries offer a world-class resilient environment for business executives seeking to source product or locate facilities,” the Resilience Index report said.
Ireland, Germany and Luxembourg rounded out the top five most resilient countries on the index. The Unites States Midwest region ranked no. 7 on the top 10 list. The West Coast ranked 21st on the index, getting hit due to its exposure to earthquakes. And the East Coast ranked eleventh, due to exposure of wind hazards, according to the index.
Conversely, Venezuela remained on the bottom of the index again this year as the least resilient country. The country continues to struggle with corruption, poor infrastructure and ill-perceived local supplier quality, the FM Global report said. It also is hampered by exposure to wind and earthquake, making it susceptible to natural hazards.
Below are the list of the 10 most resilient and least resilient countries, according to the index.
The 10 most resilient countries:
- United States Region 3 – Midwest
The 10 least resilient countries:
- Dominican Republic
- Kyrgyz Republic
Scoring and Business Application
FM Global looks at nine key drivers of resilience to determine a country’s score — things like a country’s GDP per capita, its exposure to natural hazards and infrastructure are taken into account. These drivers are grouped into three factors: economic, risk quality and supply chain.
Eric Jones, operations vice president and global manager of business risk consulting at FM Global, said the index is intended to be a thought-provoking tool businesses can use to assess risk in their supply chains. It helps organizations determine how much their businesses may be exposed to supply chain disruptions and requires them to ask themselves how they would respond should a disruption impact operations.
“This provides additional data for risk management to look at their risk and for the C-suite to look at their risk in a whole different way,” Jones said.
Shifts in Resiliency
Oil volatility, natural hazards and the rise of terrorism threats were major drivers of a country’s resiliency score this year. Cameroon, Morocco, Columbia and Kuwait were among the major fallers on the 2016 index due to their lower resilience to oil shock. Cameroon and Morocco specifically saw an increase in oil consumption while Columbia and Kuwait’s GDPs were particularly impacted by lower oil prices, the report said.
Ukraine, which ranked No. 125 this year, is another country among the top fallers on the index, as the country continues to struggle with political instability. It ranked particularly low on the index in the economic and supply chain factors.
Belgium took a slight dip to No. 11 on the 2016 index compared with 2015 when it was ranked as the ninth most resilient country. The fall could be attributed in part to terrorism threats, Jones said.
Jones encourages companies to look at all the factors that go into ranking a country’s resiliency on the FM Global Index. High-ranked countries may still struggle in one particular area, putting companies that operate in these places at certain risk. Jones gave the example of Japan, which ranked No. 33 on the index. However, as the recent earthquakes pointed out, Japan is prone to natural hazards that could significantly impact supply chains around the globe. These risks dragged down Japan’s overall risk quality factor score on the index.
Unlike factors such as political corruption and oil prices, which can change and improve over time, Jones pointed out that natural hazards are likely to continue to plague countries historically prone to them.
“That’s the reason why a lot of the locations are ranked low, because of the inherent risk of geography due to their exposure to natural hazards,” Jones said.