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Jul 2020

Corporate Risk Management - Supply chain resilience affected by lower oil prices and terrorism threats - FM Global

Source: Asia Insurance Review | Jun 2016

Depressed oil prices, natural catastrophes and the spread of terrorism are threats to global supply chain resilience, according to the recently released 2016 FM Global Resilience Index, a global ranking of countries’ business resilience to supply chain disruption.
   According to the 2016 Index, Switzerland tops the list, with Norway dropping a place from 2015 to second, due to declining oil prices. Oil-rich Kuwait experienced one of the biggest declines, dropping from 50th position to 59th this year, since its GDP was hit hard by lower oil prices. Economic productivity suffered similarly in Colombia, which fell from 110 to 119.
   Crude oil prices, however, cut both ways. Armenia (ranked 52) and Malawi (ranked 84) are two of the biggest risers in the Index this year, driven by an increased resilience to oil shock. Since their consumption of oil has fallen, the countries are less exposed to the dynamics of the oil market.
Asia-Pacific countries in the Index
Asia-Pacific countries do not come across particularly resilient other than Australia at 9th place, but several feature in 2016 as top risers. These include Kazakhstan, Bangladesh, Mongolia, Cambodia and Nepal. 
   The following group of countries has benefited from an improved commitment to fire risk management: Bangladesh (ranked 85), Cambodia (ranked 92), Nepal (ranked 94), Sri Lanka (ranked 41) and Vietnam (ranked 83). 
   In contrast, the improvement in the rankings for Kazakhstan (ranked 71), Mongolia (ranked 87) and Tajikistan (ranked 101) has been driven by an improved commitment to natural hazard risk management and, to a lesser extent, an improvement also in the relative exposure to natural hazards.
Data and sources
The scores that generate the ranking are calculated as an equally-weighted composite of nine core variables that affect resilience significantly and directly. These nine drivers used in the ranking include GDP per capita, political risk, oil intensity, exposure to natural hazards, quality of natural hazard risk management and fire risk management, as well as control of corruption, quality of infrastructure and local suppliers.
   The Index ( aggregates data from authoritative sources such as the International Monetary Fund, World Bank, World Economic Forum, as well as FM Global’s database of more than 100,000 insured locations.
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