The word that might best define the world at the moment is “unstable.” Climate change and its attendant consequences–natural disasters, weather shifts, and forced migration–threaten regions across the globe. Brexit in the U.K. and the Trump presidency in the U.S. are knocking the legs out from under two of the world’s most powerful economies. Concerns around cybersecurity add a layer of difficulty to information sharing.
In addition to posing a threat to all of our livelihoods, these challenges are creating a difficult situation for global business. If a company depends on a wide-ranging supply chain, or is seeking to expand to other countries, it’s important to know what issues they might encounter in each place their footprint reaches.
FM Global, an insurance company focused on property risk management, built out its annual Resilience Index in response to these concerns. Now in its sixth year, the Resilience Index ranks 130 countries on a variety of factors that pertain to business risk, including overall economic strength and productivity, natural hazard exposure, cybersecurity threat, government corruption, and supply chain transparency. This year, for the first time, the Resilience Index includes a metric assessing the strength of corporate governance in a country. The new metric, says FM Global’s CFO Kevin Ingram, “measures things like auditing and accounting standards, conflict of interest regulation, and good shareholder governance policies that determine how easy it is to gain access to data and information about a company.” The countries with the strongest corporate governance metrics are Singapore, New Zealand, and Canada, which encourage companies to fully report data and information to keep shareholders and governments informed and in the loop about business practices.
The addition of that metric, Ingram says, notes the importance of good policies around data, ethics, and transparency for overall business resiliency in a country. But it’s far from the whole story. For a country to present a truly stable environment for a business, it needs to be environmentally resilient–either shielded from natural disasters or with a strong system in place to manage them–and politically sound.
In 2019, the top three countries across these measurements were, in order: Norway, Denmark, and Switzerland. All three countries have relatively little exposure to natural disasters, low government corruption, good policies around business transparency, and strong and productive workforces. This does not come as much as a surprise, as these countries regularly other top global rankings, including those that measure happiness and progress on the Sustainable Development Goals. There was very little change from last year to this, Ingram says, in the top three rankings: The factors the Resilience Index measures tend to hold relatively stable.
But that doesn’t mean countries can’t shoot up in the rankings: Rwanda soared 35 points, up to number 77, from last year, largely due to strides in corporate governance, local support for new businesses and startups, and urban development. Thailand also improved due to much stronger policies around supply chain transparency, but stayed fairly middle-of-the-road in terms of overall rankings, at No. 73, due to its exposure to natural disaster risk.
While countries like Thailand may not be able to control for factors like natural disasters, the rankings do show countries what levers they can pull to make themselves more stable places to do business. Reducing government corruption, creating stronger policies around business practices, and creating systems to respond to climate impacts are all key to creating a good and resilient business economy–and it’s also not hard to see how improving those factors would contribute to more stable circumstances for residents, too.