Companies and entrepreneurs looking to spread their tendrils throughout the world step into a very complex and risky game. Doing business in one country is not necessarily the same as doing business in another.
Moving into foreign markets – or relying on firms in different nations – means weighing the virtues of international suppliers, navigating cultures of graft, ascertaining national stability, assessing the viability building facilities in a new land and figuring out exactly how corrupt a new business environment is.
For the past three years FM Global has rated nations on factors that companies and entrepreneurs want to know about. Based in Johnston, RI, the 180-year-old international commercial and industrial insurance company scores countries based on economic stability, the quality of its supply chains and the risk investors and businesses face there. FM Global calls it the Resilience Index and its latest report was released this week. (See above for our gallery of the 20 Most Reliable Countries To Do Business In.)
Scroll down to the bottom of this story to see the entire list.
Topping the list as the most reliable nation in which to do business is Switzerland, which supplanted Norway, which holds the #2 spot this year. That the two nations swapped positions between 2015 and 2016 has more to do with Norway’s vulnerability to oil prices than to any improvements Switzerland has made. “The drop in crude oil prices and (Norway’s) dependence upon that in its revenue impacted their (gross domestic product) and ultimately, from a disruptive standpoint, that dropped them slightly,” said Bret Ahnell, Executive Vice President of staff operations at FM Global.
In rating countries, FM Global tracks economic factors like GDP per capita, political risk and oil intensity—the measurement of a country’s vulnerability to changes in oil prices and supply. Risk is assessed by a country’s exposure to natural hazards, and the quality of its natural hazard and fire risk management. Supply Chain scores depend on how well a country controls corruption, infrastructure quality and the quality of local suppliers. Switzerland scored 94.9 points in the Economics category, 57.2 in Risk and 100 in Supply Chain.
At the bottom of the list – the least resilient in the business sphere – Venezuela retains its position, scoring 0 in Economics, 24.1 in Risk and 2.3 out of 100 in Supply Chain categories. “They are exposed to natural hazards and they can’t change anything about that—they’re in a wind zone and an earthquake zone.” says Ahnell. “We all know that they’ve been struggling for decades with a high level of corruption. In terms of moving goods, it’s challenging because of the poor infrastructure. The suppliers, the overall risk quality of facilities is going to be much lower. You’re not going to see a lot of well-protected buildings there with automatic sprinkler protection.”
Draught and the possibility of moving to a four-day work-week, are also factors that will affect Venezuela’s GDP, Ahnell added.
Among the biggest climbers this year are Armenia and Kazakhstan, which each jumped 31 places to 52 and 71 respectively. Armenia climbed due to its resilience to the fluctuations in oil prices, according to FM Global, and Kazakhstan felt the upside of its improved commitment to hazard risk management.
Among the steepest drops seen this year, no country fell faster than Guyana, which plummeted 32 positions, largely due to relaxing its commitment to risk management. Puru, which fell 26 places to the 99th position, suffered from the same risk woes.
Terrorism is expected to impact the scores of certain countries as well and FM Global pointed to nations like Pakistan (ranked 117), Belgium (17), Côte d’Ivoire (58), Nigeria (116), Turkey (79) and France (19) as countries that are experiencing or could see further effect.
FM Global’s rating was conducted using data collected over the past five years, through year’s end 2015. Gross domestic product (GDP) data are sourced from the International Monetary Fund, and oil data are sourced from the U.S. Energy Information Administration. Data on political risk and control of corruption are obtained from the World Bank’s “Worldwide Governance Indicators,” which aggregates 31 existing data sources. The data on infrastructure and local supplier quality come from the Global Competitiveness Report compiled by the World Economic Forum based on its annual survey of thousands of executives. The “Risk Quality” data comes from FM Global’s own RiskMark benchmarking algorithm that calculates risk quality at more than 100,000 properties it insures around the world.
This article was written by Karsten Strauss from Forbes and was legally licensed through the NewsCred publisher network.
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