JOHNSTON – What’s the best country in the world to do business? That would be Norway, according to this year’s FM Global Resilience Index.
Released Tuesday, the report separated the United States into three regions: the East Coast, the West Coast, and everything in between – dubbed the central U.S. The western U.S. ranked No. 9 among 130 nations and regions surveyed worldwide. The central U.S. ranked No. 11 and the eastern U.S. ranked No. 22. The U.S. was divided into three parts due to the regions’ varying exposures to natural disasters.
The eastern U.S. score was pulled down by its exposure to natural hazards such as hurricanes, according to the Johnston-based mutual insurance company, which specializes in loss-prevention services primarily to large corporations worldwide.
The eastern United States ranked No. 14 for supply chain factors, No. 5 for risk quality, and No. 29 for economic factors.
All three parts of the U.S. posted their lowest scores in the economic category, which includes productivity (gross domestic product based on purchasing power parity); political risk (the perceived likelihood the government will be destabilized or overthrown by unconstitutional or violent means); oil intensity (vulnerability to an oil shortage or price hike); and urbanization rate (increases in the population living in major cities).
Overall, the FM Global report scored nations and regions in three categories: economic (subcategories listed above); risk quality (exposure to natural hazards, natural hazard risk quality, fire risk quality, inherent cyber risk); and supply chain (control of corruption, quality of infrastructure, corporate governance, and supply chain visibility).
China, the world’s other major economy, also was divided into three parts, ranking No. 68, No. 74 and No. 76. However, Hong Kong, categorized as a special administrative region of China, ranked No. 18.
“As 2019 marches on, many business leaders face uncertainty over the prospects of a worldwide economic slowdown – and what that could mean for their organizations,” the report states. “This uncertainty has been exacerbated by concerns over global trade rules in the year ahead and weakening economies.
“Combined with political uncertainty in Europe, Brexit worries and U.S.-China trade tensions,” it adds, “major manufacturers are adjusting corporate profit forecasts, dividends, and bonuses in anticipation of potential weakening growth prospects.”
Norway topped this year’s list due to top 10 subcategory rankings in economic productivity, political stability, control of corruption, and corporate governance. It also scored high because of its low natural hazard exposure and its decreased reliance on oil, FM Global said.
Rounding out the overall top 10, in descending order of ranking, were: Denmark, Switzerland, Germany, Finland, Sweden, Luxembourg, Austria, the western U.S., and the United Kingdom.
Denmark ranked high particularly for having low natural hazard exposure and a high natural hazard risk quality, while Switzerland remained in the top three this year because of its quality of its infrastructure and corporate governance, its stable political climate, low corruption level, and its economic productivity, FM Global said.
The nations or regions with the bottom 10 scores, starting with the lowest in ascending order, were: Haiti, Venezuela, Ethiopia, Chad, Mozambique, Kyrgyz Republic, Lebanon, Mali, Nepal, Honduras, and Iran.
Afghanistan and Iraq – volatile nations once invaded by the U.S. and where it has maintained strong military presence – were not part of the survey. Other countries that have been at odds with the U.S. such as North Korea and Cuba also were not included.
Haiti remained the lowest-ranked country as it still is recovering from Hurricane Matthew, has been grappling with a fuel supply shortage, and remains among the poorest nations in the world, FM Global said.
Venezuela, meanwhile, suffers from its exposure to natural hazards, high level of corruption, an economic dependency on oil, and for having problems with hyper-inflation, FM Global said.
“Meanwhile, threats of tariffs and counter-tariffs are creating unease in supply chains and concerns in countries like Malaysia, Thailand, Vietnam and the Philippines,” the report states. “As companies consider where they may need to shift their global footprint, their choices are complicated by the impact of weather and climate in exposed countries, and how that can lead to business disruption, as was seen in 2018.”
Last year, a typhoon and an earthquake affected the economy of Japan (No. 27); severe flooding affected parts of India (No. 59), Italy (No. 31), and Austria (No. 8); droughts hurt China and Argentina (No. 58); and wildfires caused havoc in Australia (No. 17) and California; in addition to land-falling hurricanes in the U.S. The combined events made 2018 the costliest consecutive year for economic losses from catastrophic risk, FM Global said.
This year’s report included a new subcategory – corporate governance, which measures factors such as auditing and accounting standards, conflict of interest regulation, and shareholder governance. The top three countries for corporate governance were Singapore (No. 21 overall), New Zealand (No. 12 overall), and Canada (No. 13 overall).
Singapore scored high for a strong economy, low political risk, excellent infrastructure, low corruption, and low natural hazard risk, FM Global said.
The biggest riser in the 2019 index was Rwanda (ranked No. 77), which rose 35 spots from last year. Rwanda improved largely due to a decrease in its urbanization rate and an impressive improvement in corporate governance, coupled with steady economic growth and reductions in poverty, FM Global said.
Rising 16 spots was Thailand (ranked No. 73) due to its position as an Asian supply hub, improved supply chain visibility and corporate governance. However, Thailand remains heavily exposed to extreme weather, such as Tsunamis, and it could do better with natural hazard risk management, FM Global said.
The biggest slip in the rankings was the Republic of North Macedonia, which ranked No. 100, a decline of 22 spots from last year. The lower ranking was primarily due to lower economic productivity, increased reliance on oil, and an increased urbanization rate. Having recently resolved a longstanding naming-dispute with Greece, the country, formerly known as the Republic of Macedonia, is seeking membership in the European Union and North Atlantic Treaty Organization, or NATO, FM Global said.
“Major data breaches and sophisticated malicious hacks in the past 12 months continued to serve as a reminder that expanding one’s vendors and service providers around the world brings broader business perils,” the report states. “Those vulnerabilities include the potential for cyber risk inherent to the countries themselves, and increased risk to internet-connected equipment and machinery.”
To read the full report, visit www.fmglobal.com/resilienceindex.
Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.