Which Countries Take the Cake When It Comes to Resilience? FM Global Breaks Down the Most Pressing Global Risks
Risk managers can grasp what the problems are by scanning the headlines: war, inflation, climate change, broken supply chains.
An index from insurer FM Global can identify where the problems are likely to pose the biggest challenges.
The FM Global Resilience Index, produced annually since 2014, ranks 130 countries on a scale measuring their vulnerability to — and ability to recover from — unexpected events ranging from floods to cyberattacks to political violence.
It is a relative measure of resilience, not an absolute measure.
The purpose of the index is to help risk managers figure out where and how to allocate resources, according to Pentti Tofte, staff senior vice president for data analytics at FM Global.
“There are practical things you can do as an organization to harden your facilities against whatever perils you may be looking at,” Tofte said.
As in previous years, countries and regions of Western Europe and North America fare well on measures of resiliency, while countries in Africa, Central America and Central Asia languish toward the bottom.
Still, as the challenges facing risk managers evolve, so does the FM Global index. The company has added several new measures, capturing insights into areas such as climate change, supply chains and public health.
The index relies on data from the International Monetary Fund, the U.S. Energy Information Administration, the World Bank and the World Health Organization, among other institutions, as well as data gathered by property risk engineers from FM Global.
The index is not necessarily a predictive tool, Tofte cautioned. It could not have predicted the war between Russia and Ukraine, which has roiled energy and food markets.
But the index can point to the likelihood of political violence and war through a measure of political risk. Ukraine and Russia both have ranked low, meaning the risk is higher.
And it can also point to a country’s ability to manage the ripple effects. The war in Ukraine, for example, is testing the resilience of lower-income countries that rely on imports of food and energy, Tofte said.
Not Just Where, But When
Supply chains are topping most risk management lists as companies struggle to deliver all sorts of goods, from baby formula to sriracha sauce. FM Global has previously measured supply chain visibility, or the ability to identify a shipment’s location.
But, Tofte said, “What the last few years have shown us is that is not enough.”
A shipment may have arrived at a port, but it may be waiting offshore to be unloaded. To drill down further, FM Global introduced a new measure on supply chain timeliness, which gauges the frequency at which shipments arrive on time.
As they evaluate their supply chains, risk managers can take the data from FM Global and overlay it with their existing data, Tofte said. Companies, for example, may be looking to shift supply chains away from Russia and Ukraine.
“The obvious question becomes, ‘Where do I go, then?’ ”
Despite complaints of shortages across the U.S., the country is performing in the top 25 on measures of both visibility and timeliness, Tofte said.
FM Global divides the U.S. into three regions: the East Coast including Texas and the Southeast, the West Coast and states in between.
Top scores for timeliness go to countries in Western Europe, including Belgium, Denmark and Germany. Singapore, Japan and the United Arab Emirates also ranked in the top 20. The lowest scores go to Guinea, Ethiopia and Zimbabwe.
China, a manufacturing powerhouse that is divided into three regions for the FM Global index, is in the top 30 for timeliness. Hong Kong, listed separately, is in the top 20.
Extra Attention to ESG and Climate
For the first time, the index seeks to illuminate areas conducive to corporate efforts around environmental, social and governance issues, also known as ESG, according to Tofte.
“The ESG filter enables users to focus exclusively on ESG-related measures within the resilience index to better understand inherent country risks and identify opportunities through this lens,” Tofte said.
The filter is accessible through an interactive map created as part of the FM Global index. It incorporates some existing measures of resilience and adds new ones: a country’s vulnerability to climate change, known as climate risk exposure, and also how well its infrastructure is prepared to meet the risk, a driver called climate risk quality.
The existing measures include control of corruption, corporate governance and productivity.
Users also can filter countries specifically for climate-related issues. “In some cases. it’s OK to have a high exposure as long as you go in eyes wide open,” Tofte said.
The United Kingdom, for example, ranks 111th for exposure to climate risk. But the island nation is 17th in terms of climate risk quality. The Republic of Korea, meanwhile, jumped 36 places to 53rd on climate risk quality after publishing a national flood map, which improved awareness of the risks, Tofte said. The country ranks 110th in terms of climate risk exposure.
Countries with the highest climate risk quality include Croatia, Finland and Ireland. At the bottom are the Dominican Republic, Guinea and Honduras.
The U.S. interior is in the top 10. The East and West coasts fared worse but still landed in the top 25. All three U.S. regions are in the middle of the pack when it comes to exposure to climate risk.
The 2022 index also addresses questions raised by policyholders about COVID-19, Tofte said. The researchers wanted to know if the index could help them understand how well a country might recover from a pandemic.
In response, FM Global added a measure based on health care expenditures, Tofte said.
“There is a correlation between how much a country spends on health care per capita and average life expectancy.”
The three U.S. regions ranked at the top for spending, though the country has faced criticism for what it gets in return. Behind the U.S. are nations of Western Europe. African countries Chad, Madagascar and Ethiopia are at the bottom. &