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Doing business abroad: Where’s riskiest?

– Posted in: International Business Relations
Doing business abroad: Where's riskiest? (Thinkstock/iStock)

In order for a business to compete in today’s global economy, effective supply chain management is critical. Whether tiny cottage industries or enterprise-scale organisations with thousands of geographically distributed employees, companies worldwide rely on collaborative relationships with international partners in order to prosper.

This can, for obvious reasons, be something of a balancing act. An inefficient supply chain can put a business at a distinct competitive disadvantage, while a single weak link in that network can have catastrophic consequences. For these reasons a solid foundation of trust and collaboration is necessary, hence the value placed by businesses on high-quality translation and interpretation services.

However, there’s more to supply chain management than keeping the wheels of global cooperation well-oiled. There are also factors that make doing business with certain countries risky for reasons beyond the control of supply chain managers. Think of natural disasters such as floods and earthquakes, for instance, or the impact of political turmoil.

These issues can be a challenge to quantify, but that’s precisely what property insurer FM Global has attempted to do in a new report. The FM Global Resilience Index ranks 130 countries by the level of risk they represent to businesses who locate supply chains and facilities therein, based on factors like susceptibility to natural disaster, quality of local infrastructure, responsiveness to incidents and the influence of corruption.

The end result, accessible through an interactive web-based tool on the FM Global website, should prove invaluable to supply chain managers who are tasked with assessing the risks associated with establishing business partnerships in a particular region. As the forces of globalisation continue to gain momentum, this burden will only increase across the board, affecting executives in all sectors.

So, what did the FM Global report discover? Read on to find out.

The highest scorers

Out of the 130 countries included in the research, Norway, Switzerland and Canada were singled out as the three locales in which supply chains are most resilient.

The prosperous Nordic nation took the overall top spot, scoring well for economic factors as well as one of the world’s lowest levels of corruption. Over in central Europe, Switzerland swept in at number one worldwide for political risk, infrastructure and local supplier quality, though the country was dragged down to second place overall by exposure to natural disasters.

FM Global also identified a fast-rising star in the form of Bosnia and Herzegovina, which climbed 19 places in the international rankings between 2013 and 2014 on the back of reduced political risks and improved local supplier quality.

The picture was a little more mixed over in the world’s two biggest economies. For the purposes of the report, FM Global divided the US and China into three regions each in order to account for varying levels of exposure to natural disasters. Each US area made it into the top 25 internationally, while China’s regions ranked 61st, 66th and 75th. The lowest-scoring Chinese grouping was the Shanghai region, which again faces an elevated risk of natural disaster.

The riskiest regions

On the other end of the spectrum, FM Global identified Kyrgyzstan, Venezuela and the Dominican Republic as the three countries that are least resilient to supply chain disruption. A range of factors were at play behind the nations’ scores, including Kyrgyzstan’s vulnerability to an oil shock (129 out of 130) and the influence of corruption on Venezuela’s supply chains (128 out of 130).

Bangladesh, meanwhile, was singled out as one of the countries to have fallen the furthest between 2013 and 2014, with FM Global citing declines in the quality of both natural hazard and fire risk management.

Of course, if there’s one thing we should take away from the report, it’s that a wide range of factors should be taken into account by a company that intends to set up supply chains or facilities on foreign soil. No two nations are alike, and it isn’t always easy to make a distinction between developing countries and economic powerhouses.

This was something commented upon by Margareta Wahlstrom, United Nations special representative of the secretary-general for disaster risk reduction, at the launch of the report.

“We live in a volatile world and whether that’s because of what nature wrought or the human element, every nation is prone to some form of risk,” she said.

“The question is why are some countries … more resistant to supply chain disruption or better able to bounce back? It’s a puzzle that world leaders are perpetually trying to solve and there’s endless value inherent in a tool like the FM Global Resilience Index to help answer that.”

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