Armed conflict. Economic disruptions. Changing climate conditions. The unpredictability of affairs on our planet complicates major business decisions that were never simple to begin with. Consider site selection for an expanding global business: Where might you build your next plant, office or distribution center? This question has often been complicated to answer. These days it’s only more so.
The time-honored criteria for site selection generally point executives to places where:
- Customers are,
- The workforce is adequately skilled,
- Land, labor and taxes are affordable, and
- Distribution is easy.
As times become more complex, other criteria are gaining importance. In 2017, when you’re considering a business expansion (or a new business partner), you’ll want to ensure that in your new location:
- You’ll be protected from cyberattack,
- You’ll have visibility throughout an ever-expanding supply chain,
- You’ll be relatively safe from natural disasters fueled by climate changes,
- The economy won’t be disrupted by a Brexit-like turn of events,
- Civil order is assured,
- Oil prices won’t control your fate, and
- Rapid population growth won’t strain infrastructure.
The quest for data
Even the most capable companies are hard-pressed to make sound, thoughtful and logical decisions that objectively account for all of these criteria. This challenge can be troubling for financial executives committed to the principle that data drives decisions. The company I work for, a commercial property insurer, has attempted to help these executives through an ambitious data-aggregation project.
First, let me set the context: I believe one of the most important qualities of a business is ultimately resilience. What I mean is that a business should be able to successfully resist business disruptions better than its competitors, and rebound quicker when such events are unavoidable.
I’ve learned through observation and experience that a disruption—whether caused by a storm, fire, cyberattack or human factors—can wreak significant damage on even the best-managed business. A disruption is a ripe opportunity for your competitors to poach your customers and increase revenue, market share and shareholder value at your expense. It’s also a ripe opportunity for you, if you’re more resilient than your competitors.
So, in the data project I mentioned, some of my smartest colleagues got together and came up with a way to look at 130 countries and territories and quantify the resilience of the business environment they provide to businesses within their boundaries. The resulting interactive index ranks individual countries by this measure and quantifies 12 drivers of overall resilience. These drivers include:
Executives can analyze a country’s resilience ranking overall or by any one of these drivers. The goal is to help leaders make better decisions on siting facilities, finding suppliers, evaluating established supply chains or identifying customers who may be vulnerable.
Countries and their risks
Overall, wealthy Switzerland occupies the number-one spot of the 130 countries and territories, reflecting high marks for its infrastructure, local supplier quality, political stability, control of corruption and economic productivity. Hurricane-ravaged Haiti ranks at the bottom of the index due, in part, to its high natural hazard exposure and poor economic conditions.
Oil-rich Saudi Arabia has emerged as a country with above-average inherent cyber risk. Its high internet penetration, combined with a limited cyber security industry, make it a more vulnerable target. Developing India, by contrast, with its growing information technology industry, emerges as a country with below-average inherent cyber risk.
In the context of natural disasters, Sweden provides above-average resilience due, to an extent, to its lower-than-average exposure to hazards such as windstorms, flood and earthquakes. On the other hand, flood-prone Bangladesh, a major manufacturing hub for apparel and textiles, ranks toward the bottom of the index.
In the context of global supply chains, Germany, a major exporter and importer, ranks near the top in resilience, driven partially by its strong ability to demonstrate where parts, components or products are in transit. Russia ranks below average in this respect.
Insights like these are critical for companies who are pressured to do more business in distant regions. While some insights into regional resilience can be gleaned from the news media or travel, there’s no substitute for hard numbers in a data-driven business environment. This type of information can help you plan strategically and, in the process, become much more resilient. Given the difficulty of predicting the next potential disruption you might encounter, such insights become more essential to long-term business performance.
Bret Ahnell is executive vice president of FM Global, one of the world’s largest commercial and industrial property insurers.