Mutual insurance firm FM Global released its 2016 Resilience Index in May, which ranks 130 countries for their business risk and resilience to supply chain disruption. The ranking revealed Norway’s slip from first place to second due to global oil prices, with Switzerland taking over the top spot. Venezuela finished last, reflecting high perceptions of corruption, poor infrastructure, natural disaster hazards and severe economic mismanagement as well as low commodity prices.
The 2016 Resilience Index defines resilience as “a combination of the vulnerability of a country to supply chain disruption and the country’s ability to recover from such disruption”. The study found that continued trends in lower oil prices and terrorism threats are hitting supply chain resilience, particularly in countries that are dependent on oil exports and more vulnerable to external shocks.
Countries with lower oil consumption, being protected from the volatility of the oil market, rose in this year’s ranking. Armenia and Malawi made notable gains, rising 31 places and 27 places, respectively, since 2015. The index explains that this was driven by their increased resilience to oil shock.
Political risk has had a significant negative impact on the rankings of Pakistan, Turkey, Egypt and Nigeria, among others. Following Venezuela, the index’s bottom-ranked countries (in ascending order), are the Dominican Republic, Kyrgyzstan, Nicaragua, Mauritania, Ukraine, Egypt, Algeria, Jamaica and Honduras.
FM Global’s top 10 countries for supply chain resilience are: Switzerland, Norway, Ireland, Germany, Luxembourg, the Netherlands, the US, Canada, Australia, and Denmark. France and the UK retained their spots at 19th and 20th, respectively, but the study’s authors say that a Brexit may impact the UK’s future ranking in the Resilience Index.
FM Global’s 2016 list reflects a combination of nine factors affecting the vulnerability of business: GDP per capita, vulnerability to oil shock, perceptions of political risk, corruption, quality of infrastructure, local suppliers, exposure to natural hazards, quality of hazard risk management, and quality of fire risk management. The research behind the index draws on data from the IMF, the World Bank, the World Economic Forum and FM Global’s benchmarking algorithm, which covers 100,000 properties worldwide.
“By giving executives easy access to authoritative information on factors that could disrupt their supply chains, the FM Global Resilience Index provides a simple way to analyse the potential for business risk and drive better decisions,” said Bret Ahnell, executive vice-president at FM Global. “Resilient supply chains give businesses a distinct advantage by protecting their operational integrity, revenue stream, market share and shareholder value. A fragile supply chain, on the other hand, often harms the company involved, sometimes for the long term.”
The index, compiled annually by advisory firm Oxford Metrica, provides businesses with relevant insight on selecting suppliers and facilities, evaluating established supply chains and spotting which customers may be vulnerable.