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Ukraine and Thailand slump but Taiwan gains in supply chain resilience index

Steve Rogerson
April 2, 2015
 
Ukraine, roiled by conflict with neighbouring Russia, poses significant challenges for companies considering expanding their supply chains there. So does Thailand despite the years that have passed since the popular manufacturing destination’s devastating floods. These vulnerabilities, as well as those of many other countries, are quantified in the 2015 FM Global Resilience Index, released this week.
 
Ukraine fell 31 places in this year’s index to 107th, the biggest year-over-year fall in the rankings, owing directly to Russian military intervention there. This worsening political risk and a weakened infrastructure are the main negative factors affecting the rank of Europe’s largest country.
 
Thailand, one of the world’s top exporters, fell 20 places to 82nd of 130 countries and territories examined. In particular, the ranking reflects poorer perceptions of the country’s infrastructure – transport, telephony and energy – and the quality of local suppliers as well as a decline in political stability and the quality of fire risk management. These matters compound the misery of the country’s 2011 floods that wreaked an estimated US$45bn in losses and business disruption worldwide.
 
There was good news, however, for Taiwan. It soared 52 places in the annual rankings to 37th overall, a bigger rise than any other country. Its ascension is mainly due to an improvement in the country’s commitment to risk management, as it relates to both natural hazard risk and fire risk.
 
Updated annually by commercial property insurer FM Global, the data-driven index gauges resilience (the flipside of risk) along nine dimensions. The index compiles vetted data from sources such as the International Monetary Fund, World Bank, World Economic Forum and FM Global’s database of more than 100,000 client locations. Countries and territories examined are ranked from most to least resilient. Online and interactive, the index enables users to drill into individual resilience factors and drivers as they plan supply chain expansions, select suppliers and backup suppliers, and evaluate existing facilities.
 
“Business leaders who don’t evaluate countries and supply chain resilience can suffer long-term consequences,” said Bret Ahnell, executive vice president of operations at FM Global. “If your supply chain fails, it can be difficult or impossible to get your market share, revenue and reputation back. The FM Global Resilience Index is designed to help business leaders stay in business by making informed decisions about where to place and maintain global supplier facilities.”
 
Norway is ranked top in the index as the country best suited for companies seeking to avoid disruptions in their global supply chain operations. Venezuela is ranked last on the list of the 130 countries and territories listed.
 
Ireland keeps its place in the top ten, and moves up one place this year to fourth in the rankings, reflecting both its low exposure to natural hazards and the fruits of its austerity and fiscal regimes. For the third year running, the UK has held on to its rank of 20th. Its ranking reflects its resistance to oil shocks as its consumption of oil relative to GDP is comparatively low. The UK scores well on other key drivers such as perceptions of its control of corruption and the quality of local suppliers, but there is scope for improvement in risk quality, particularly as it relates to fire risk management. In addition, the risk of terrorism continues to threaten supply chain security.
 
The USA and China are each segmented into three separate regions because the geographic spread of these countries produces significantly disparate exposures to natural hazards. Region three of the USA, which includes most of the central part of the country, ranks tenth. Region one, encompassing much of the east coast, is 16th and region two, primarily the west coast, ranks 21st.
 
China’s three regions rank 63rd (region three), 64th (region one) and 69th (region two). Beyond natural disaster risk, China’s other challenges range from “poor accountability and transparency, high levels of perceived corruption and growing security concerns to problems in its financial sector, especially with regard to the fragile position of its banks,” according to the index.
 
Romania jumped 25 places due mainly to improved perceptions of infrastructure and local supplier quality.
 
Guyana and Bolivia both rose out of the bottom ten this year, owing to significant improvements in commitment to natural hazard risk management in the region. Additionally, Bolivia demonstrated an improvement in the perceived quality of its overall infrastructure.
 
The top ten countries most resilient to business supply chain disruption are:

  • 1. Norway
  • 2. Switzerland
  • 3. Netherlands
  • 4. Ireland
  • 5. Luxembourg
  • 6. Germany
  • 7. Qatar
  • 8. Canada
  • 9. Finland
  • 10. USA region three (central)
 
The bottom ten countries are:
  • 121. Tajikistan
  • 122. Egypt
  • 123. Pakistan
  • 124. Jamaica
  • 125. Honduras
  • 126. Dominican Republic
  • 127. Nicaragua
  • 128. Mauritania
  • 129. Kyrgyz Republic
  • 130. Venezuela
 
The indexis compiled annually for FM Global, one of the world’s largest commercial property insurers, by analytics and advisory firm Oxford Metrica. It is generated by combining three core factors of business resilience to supply chain disruption – economics, risk quality and qualities of the supply chain itself. The drivers of these factors include GDP per capita, political risk, vulnerability to oil shortages and price shocks, exposure to natural hazards, quality of natural hazard risk management, fire risk, control of corruption and the quality of infrastructure and local suppliers.
 
“As globalisation increases, business is increasingly conducted in a borderless and interconnected way,” said Deborah Pretty, principal at Oxford Metrica. “The FM Global ResilienceIndex provides a unique and compelling look at how 130 countries and territories stand up to supply chain disruption. CEOs, CFOs and other decision makers can now make informed investments knowing the vulnerability of these countries to supply chain disruption and their ability to recover from it.”