The Most And Least Reliable Countries

Jun 11 2014, 11:54am CDT | by

Are you looking for new international suppliers for your company? Or thinking about where to open an overseas office? When you evaluate your international customers, do you care about the stability of their business environment? What about government corruption? If you already have foreign offices, have you checked on the risks of natural disasters like floods and earthquakes in those locations? How sound is the infrastructure there?

For country-by-country shortcut answers to those questions, consider the new “FM Global Resilience Index,” a ranking of 130 countries by FM Global, the 179-year-old international commercial and industrial insurance company based in Johnston, Rhode Island. FM Global’s main business: providing loss prevention services to big companies around the globe.

For the first time, FM Global has put countries through a rigorous evaluation process and produced a publicly available ranking of the places it deems most resilient. Landing in first place is a country that may not be at the top of your list for opening a subsidiary or a factory: Norway (ExxonMobil has operated there for more than 120 years; ConocoPhillips also has longstanding oil fields there). Coming in second is a more obvious choice, given its bank secrecy laws and stable political environment: Switzerland. Canada, with its solid government, oil reserves and well-developed infrastructure, is in third place.

The U.S. doesn’t rank until 10th place and then only a portion of the country MF Global calls Region 3, made up of 26 states in the Southwest, Midwest, the South and Washington, D.C. on the East Coast is in the slot. Other states in the group include Arizona, Illinois, Michigan and Ohio. The U.S.’s region 1 is at risk for wind storms and includes Florida, Louisiana, New Jersey and New York, placing 18th on the list. US Region 1 is made up mostly of Western states like California and Oregon, plus Hawaii and Alaska. Because of those states’ vulnerability to earthquakes, the region scores down at 21 on the list, just behind the United Kingdom and above Singapore.

FM Global’s methodology involves measuring countries’ strength in nine areas, under three rubrics: economic, risk quality and supply chain. It looks at these nine things:

  1. GDP per capita,
  2. political risk including terrorism,
  3. oil intensity, meaning the chance the country will experience an oil shortage,
  4. exposure to natural hazards,
  5. quality of natural hazard risk management, meaning the country’s preparedness to deal with a disaster like an earthquake or a flood,
  6. ability to handle fires,
  7. control of corruption,
  8. quality of the infrastructure,
  9. quality of local supplies

FM Global used the following sources: The International Monetary Fund supplies the GDP data, the information about the oil supply is from the U.S. Energy Information Administration, and the data on political risk and corruption come from the World Bank’s “Worldwide Governance Indicators,” which pulls from 31 data sources. The Global Competitiveness Report, put together by the World Economic Forum and based on its survey of thousands of executives, is the source of the data on infrastructure and local supply chain quality. Finally the data on risk quality like exposure to natural hazards, readiness to manage natural calamities and ability to fight fires, all come from an algorithm FM Global developed to calculate risk at more than 100,000 commercial properties it insures around the world.

There are no surprises among the top 25 countries, which I’ll list below. They’re mostly European—Germany, Luxembourg, Belgium, France, Finland, Sweden, Denmark, etc. New Zealand and Australia also make the list, as do Hong Kong, Singapore and Qatar.

Which are the least reliable countries? I’ve also listed the worst 25 below, starting with the least resilient. The Dominican Republic ranks at the very bottom of the list. As an island nation in the middle of the Caribbean it is vulnerable to both hurricanes and earthquakes. Also its infrastructure is crumbling and building codes are lax, says John Hall, an executive vice president at FM Global. Corruption is a huge problem. The German NGO Transparency International pegs the D.R. at No. 123 out of 177 companies it ranks, with No. 1 being the least corrupt (Denmark and New Zealand are the least corrupt countries in the world, according to the NGO). Venezuela is the second-least-resilient. Like the D.R., it is subject to intense hurricanes and flooding. It also has very poor insurance against fire risk, and ranks even lower than the D.R. on Transparency International’s list, at 160.

FM Global collected the data for the list in 2013, so it doesn’t reflect some of the world’s most dire recent developments, like the violence and political upheaval in Ukraine, which ranks at No. 76, behind a region of China (like the U.S., broken up into three groupings) and above Senegal. Next year Ukraine is likely to have a lower rank.

One caveat: FM Global’s list doesn’t include some of the least stable, most disaster-prone countries in the world, like Haiti, Syria, Sudan and Congo, because FM Global couldn’t gather enough data about those places. Rwanda, an increasingly stable place to do business, is also missing. There are some 196 countries in the world, depending on how you count them (that includes Taiwan, which some countries, like the U.S., don’t recognize as independent states), so the list is missing 66 of them.

One example Hall gives of a country that would have been helped by such an index: Japan, which had many of its backup manufacturing operations in Thailand, when severe flooding hit in 2011. Major Japanese corporations like Honda, Toyota and electronics maker TDK got hit hard. Cannon, Nissan, Hitachi and Toshiba Corp all had to stop production because of the floods. “In Thailand they had built facilities in flood plains, and major floods went on for six weeks,” says Hall. “This index is trying to help people understand where the risks are.” Thailand ranks at 62 on the FM global list.

 
 
 

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