Switzerland Again Tops FM Global’s 2017 Resilience Index, But Rankings Have Shuffled

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Switzerland has again taken the top spot on the FM Global Resilience Index, which ranks 130 countries and territories according to their resilience to supply chain disruptions. This fourth annual report, released alongside an interactive graphic, cites cyber attacks, natural hazards and supply chain failure among businesses’ most urgent risks today.

The no. 1 country may have stayed the same as 2016, but a bit of shuffling took place throughout the list. Luxembourg, previously at no. 5, climbed to no. 2. In contrast, Norway, in the second spot last year, fell to sixth place. Thanks to the stabilizing political situation, Ukraine reversed its downward trend and made an impressive jump from its standing in the bottom 10 last year to no. 90.

Methodology

This year, the countries and territories — the U.S. and China, for example, are divided into multiple regions — were assessed on 12 drivers related to economic strength, risk quality and supply chain conditions, up from nine drivers last year. The three new drivers are rate of urbanization, inherent cyber risk and supply chain visibility, as you can see in the graph below.

One might ask, what does urbanization have to do with supply chain risk? “When urbanization is rapid and unplanned,” FM Global argues, “it poses acute risks to a country’s critical infrastructure and social stability, induces competition for basic resources and exacerbates the spread of disease. For those seeking the smooth running of their business operations, a country with a high urbanization rate is a warning sign requiring active management.”

With the news of the global WannaCry ransomware attack merely a couple weeks old, it should come as no surprise to see cybersecurity as an indicator of supply chain resilience. In calculating this score, FM Global looks at a country’s internet access (more opportunities to be attacked as well as attack) and civil liberties (working off the idea “a more open society fosters a thriving industry for prevention and recovery”).

Similarly, there is little to dispute over the addition of supply chain visibility as a driver. It has long been a priority of businesses, as visibility in this case is essentially the same as thorough knowledge of one’s supply chains. Knowing who your suppliers (beyond tier 1) are and knowing their weak spots allows businesses to be more prepared and hence resilient in face of potential risks.

Which Countries Have Moved Up?

Below is a side-by-side comparison of the 10 countries most resilient to supply chain disruptions from this year’s index and last year’s.

Source: FM Global data

There are a few changes from 2016 to 2017 (as well as one rechristening), but overall Nordic countries and Central Europe dominate both lists. Formerly at no. 8 in 2013, Luxembourg has been gradually moving up the list thanks to its economy’s reduced reliance on oil, according to FM Global. Last year’s political developments are also to thank. The index points out that Luxembourg is also “well-placed to benefit from financial institutions that may be seeking a new home, post-Brexit, following the United Kingdom’s departure from the European Union.”

Sweden rose from 16th to 3rd place, largely due to improved risk quality scores. Austria similarly moved from 18th place to 4th, and like Sweden, the reason has to do with higher risk quality scores. Looking at the middle of the rankings, India moved up 13 places in the index to no. 60, “due primarily to improvements in supply chain visibility, infrastructure and natural hazard risk quality.”

Ukraine had one of the most impressive rises, from the bottom 10 in 2016 to no. 90 in this year’s index. Similarly, Egypt and the Dominican Republic rose to 91st and 96th places, respectively. There is no data this year on a number of countries included in the 2016 index, such as Kyrgyzstan and Mauritania.

Which Countries Have Moved Down?

Now, here is a side-by-side comparison of the 10 countries least resilient to supply chain disruptions.

Source: FM Global data

Poorer supply chain visibility caused Vietnam to slide eight places down to 95, whereas it had been singled out as one of the “top risers” in 2016’s index. Ethiopia’s drop from no. 93 to no. 127 is not surprising given its ongoing land disputes and political turmoil, though the country is an increasingly popular sourcing destination for apparel companies.

Bangladesh, also one of 2016’s “top risers,” sank from no. 85 to no. 111, perhaps partly due to FM Global’s inclusion of urbanization rate as a driver. Dhaka is one of the most dense cities in the world, and Bangladesh likewise has one of the highest rates of urbanization.

Quick Facts

Here are some more interesting quick facts from the 2017 index:

  • Saudi Arabia, Bahrain, the United Arab Emirates and Qatar are among the countries have some of the highest exposure to cyber risk.
  • Countries with high rates of urbanization and significant flood exposure include Bangladesh, Vietnam, China, Thailand and India, which are all major manufacturing hubs.
  • Following a number of fires in high-rise buildings, the UAE has overhauled its fire safety code, with higher safety requirements and enforcement measures.
  • Countries with the “largest area devoted to economic activities exposed to riverine flood” include Pakistan, Laos, Bangladesh, Thailand, Vietnam and China.

Check out the full report here.

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