News Risk Management21 May 2018

Australia:Resilence index sees Australia ranked among top 20

| 21 May 2018

Australia is among one of the most resilient countries globally, ranking 17th overall on the 2018 Resilience Index, released last week by FM Global which is one of the world's largest commercial and industrial property insurance providers.

The Resilience Index is the first and only publicly available data-driven tool to annually rank 130 countries and territories by the resilience of their business environments. The interactive online resource addresses deep concerns about business risks such as natural hazards, cyber risk, political and economic risk and the overall control and quality of supply chain. Twelve drivers determine a country’s overall resilience ranking.

In the case of Australia, the country improved in the past year from 23rd to 17th in the world for political risk, due to perceptions of a stable government with low levels of politically motivated violence and terrorism. Australia is also recognised for high natural hazard risk quality (ranked 15, driven largely by the quality and enforcement of its building codes in respect to natural hazards like floods and windstorms. Australia’s strong supply chain visibility (ranked 21st) is notable as is the country’s control of corruption (ranked 14) and supplier quality (ranked 24), ensuring the country’s overall resilience remains high.

However, key findings from the Index also reveal that Australia experienced a fall in certain resilience drivers during the past year, when it ranked 15th globally.

Australia fell seven places based on perceptions of the quality of its infrastructure (from 34 in 2017 to 41 in 2018), possibly due to recent blackouts in South Australia and pressure to continue operating aging assets such as the Liddell coal power station. The drop may also reflect the increasing proportion of distributed energy sources in Australia which lower the overall resilience of the country’s traditional power networks.

The country also experienced a drop in its ranking for inherent cyber risk where it fell nine places—from 66th in 2017 to 75th in 2018. This is due to slightly greater access to the Internet and thereby greater exposure to cyberattack. Increased cyber risk means business leaders should be acutely aware of the risk of stalled operations, disrupted supply chains, class-action lawsuits and permanent brand damage in the event of an attack.

Australia's resilience ranking is well behind that of Switzerland and Luxembourg, which ranked number one and two respectively. Switzerland’s top spot is attributable to the quality of its infrastructure and local suppliers (ranked 1st for both drivers), its low political risk (ranked 5), high control of corruption and economic productivity (ranked 8 for both drivers), while Luxembourg ranked second, held back by only inherent cyber risk (ranked 96) and vulnerability to an oil shock (ranked 92).

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