News Risk Management23 May 2018

Hong Kong, Japan and Singapore are Asia's most resilient countries-FM Global

23 May 2018

Hong Kong, Japan and Singapore are Asia's most resilient countries, ranking in the top 30 of the 2018 FM Global Resilience Index.

Hong Kong (ranked 19) is Asia’s most resilient business environment overall, ahead of Japan (ranked 24) and Singapore (ranked 28), due to their high rates of economic productivity, excellent infrastructure quality and supply chain integrity, according to the Index issued last week.

Above Hong Kong were Australia (ranked 17) and New Zealand (ranked 23), which rounded up the top five resilient Asia-Pacific countries. Switzerland, Luxembourg, Sweden, Norway and Germany are the most resilient countries in the world, making up the global top five in that order.

The index—an annual ranking of 130 countries and territories by the resilience of their business environments—is an online, interactive resource to help global executives plan where to do business. Overall resilience rankings are determined by twelve drivers in the categories of economy (productivity, political risk, oil intensity and urbanisation rate), risk quality (natural hazard exposure, natural hazard risk quality, fire risk quality and inherent cyber risk) and supply chain (control of corruption, infrastructure quality, local supplier quality and supply chain visibility).

Rankings for Malaysia (ranked 40), Thailand (ranked 97) and South Korea (ranked 44) remained relatively unchanged from 2017, where natural hazard exposure, political risk, and inherent cyber risk influence their overall global positions. Notable findings of this year’s index include a worsening of Hong Kong and Malaysia’s political risk profiles, while Singapore is the highest ranked in the world for political stability.

Asian countries took the titles of both biggest faller and riser. The Philippines (88) was the biggest faller this year, dropping 14 places. The deterioration in enterprise resilience was due primarily to worsening political risk, relating to the government’s declaration of martial law in Mindanao and its ongoing war against terror. Inherent cyber risk also heightened for the islands, as individual access to Internet rose from 40% to 55%. While this increases exposure to cyber attack, it is positive in reflecting economic progress being made.

Meanwhile, the biggest riser in overall resilience was Indonesia (ranked 75), which rose 19 places from last year, due to ‘impressive reductions in political risk and corruption, reduced reliance on oil for economic productivity and perceived improvements in the quality of both infrastructure and local suppliers’. Among the 12 drivers, the biggest threat to the country’s enterprise resilience are exposure to natural hazard combined with a high rate of urbanisation and relatively poor fire risk quality, said FM Global. It recommended that focused attention on improving both the building codes and their enforcement would do much to build enterprise resilience there.

Cyber risk affected by civil liberties

The 2018 index also found that the risk of cyber-attack now threatens businesses’ very existence and raises the spectre of stalled operations, disrupted supply chains, class-action lawsuits and permanent brand damage, though severity varies significantly with geography.

In the cyber resilience dimension, Taiwan soared 57 places in cyber resilience (50 in 2018 from 107 last year), the biggest rise in this year due in large part to an increase in civil liberties. Hong Kong improved 34 spots (69 from 103) for the same reason, together with a small increase in Internet penetration, while the Philippines went down from 32 to 66. Internet penetration explains Australia’s nine-place fall in cyber resilience. The country and continent dropped from 66th to 75th of the 130 regions ranked in the Index, driven by a 3-percent increase in internet penetration.

Other findings

Other findings of the 2018 index are that fire remains the leading cause of property damage worldwide, and one of the most preventable ones. With the Grenfell Tower fire blamed on highly combustible materials and lack of sprinklers, the UK has room for improvement in fire risk management despite ranking rather high up at 18th for resilience to business disruption.

Nat CATs wise, China Region 1 (69), the Philippines (88), Japan (24), Mexico (62) and US Region 1 (10) were found to have significant natural hazard exposure. Political risk soars in the US (all three regions), likely reflecting a turbulent diplomatic climate intensified by North Korea’s nuclear threat and Russia’s election meddling, though the country as a whole remaining a resilient environment for business (all three regions came in 9th, 10th and 15th overall).

While the top three countries for overall resilience are the same as last year (Switzerland, Luxembourg and Sweden), the bottom three are also the same—Haiti is bottom ranked at 130, followed by Venezuela and Nepal.

More on the 2018 FM Global Resilience Index can be found here.

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