Global Supply Chain Risk Mitigation: Denmark Bumps Norway from Top Spot

After a year of supply chain disruption, political tension and growing climate worries, resilience has become a prized commodity for global businesses, and it’s more prevalent in some places than in others.

One such place is Denmark, which now tops the world in the newly released 2021 FM Global Resilience Index [www.fmglobal.com/resilienceindex], the definitive global ranking of countries and territories by the resilience of their business environments. The Scandinavian nation rises from third in last year’s index to its first-ever top ranking, bumping Norway, which has held the No. 1 spot in recent years, into second place.

The index is online and interactive, and the rich underlying data for 130 countries and territories can be downloaded at no cost and incorporated into a range of business processes. Produced by FM Global, one of the world’s largest commercial property insurers, the index provides a composite picture of 12 objective measures reflecting each country or territory’s economic, risk quality and supply chain conditions. The resource helps senior executives create, evaluate and manage resilient multinational businesses by making informed choices about site selection, partnerships and geographic markets.

“Over the years, leanness, speed and short-term profit have often reigned as primary concerns of global businesses,” said Eric Jones, vice president, global manager, business risk consulting at FM Global. “But the historic events of 2020 reminded the world that these qualities are subordinate to the ability to resist, rebound from or operate through lockdowns, demonstrations and climate-related disruptions. Resilience has always affected a company’s total value, and this past year’s events brought this imperative into sharp relief.”

Top, bottom, risers and fallers

Top-ranked Denmark is known for its quality of life, education, health care and income equality. In this year’s index, it benefits from higher resilience rankings than last year in the measures for economic productivity, fire risk quality and oil intensity (signifying increased vulnerability to oil shock). Luxembourg rounds out the top three countries in overall business resilience, with Western Europe taking 9 of the top 10 places. The Central United States is the lone exception, occupying ninth place as it did last year.

Ukraine is the index’s biggest riser, soaring from 84 to 63 based on improved resilience rankings in multiple measures, including productivity, oil intensity, natural hazard risk exposure, inherent cyber risk and control of corruption.

The biggest faller is Oman, sinking from 57 to 69 because of steep drops in economic productivity and oil intensity. The drop would have been even larger if not for an improved ranking in natural hazard exposure due to new, more incisive data incorporated into the index relating to earthquake risk.
The United Kingdom re-entered the index’s top 10 (now ranked 10 in overall resilience, up from 13 in 2020’s index), driven primarily by an easing of political risk, reflecting in part the election of a majority government with more mainstream policies and the completion of Brexit.

The United States region 1 (the East and Southeast) fell from 10 to 17 in this year’s index, reflecting two changes: a drop in the region’s natural hazard exposure ranking of nine places due to the new earthquake risk data; and a falling political risk ranking for the country as a whole (from 41 down to 50). The latter shift may reflect partisan acrimony and heightened conflict over social justice issues.

Iran for the first time entered the bottom three ranks with a 14-place drop in productivity and a 7-place drop in political risk rank. Venezuela, second to last, and Haiti, last, round out the bottom three countries.

China’s region 1 (the East) fell nine places, from 68 to 77, due to a 19-place drop in the country’s oil intensity ranking and a 6-place drop in control of corruption. China’s region 3 (Central and West) fell six places, from 65 to 71, exacerbated by a 9-place drop in its natural hazard exposure ranking.

Climate risk

FM Global has noted growing concerns among global companies over risks related to the changing climate. Companies have contended with severe floods, droughts, wildfires, precipitation and windstorms around the world.
Natural hazard exposure is one of several climate-related resilience measures in the index, and a frequent contributor to that exposure is flood risk – among the changing climate’s most tangible threats. A related index measure is natural hazard risk quality, a reflection of how well countries are mitigating their exposure to natural hazards. A third index measure with climate risk implications is urbanization rate. The faster a region’s urbanization, the more business property and value is in harm’s way during any given climate-related event. Finally, the quality of [transport and utilities] infrastructure provides important clues about a country’s prospective response to extreme conditions.

“Climate is one of many concerns that prompts companies to consult the index for their strategic decision making,” said Jones. “Whatever a company’s concern in any part of the world, resilience is directly linked to the goals of preserving revenue, market share, growth opportunities and total enterprise value. The index can help with that.”

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