Best Countries to Locate a Business in Age of Cyber, Storms, Fires and Political Risk

The risk of cyber attack, once overhyped, now threatens businesses’ very existence. Its severity varies significantly with geography: For example, inherent cyber risk has climbed in France over the past year while plummeting in Taiwan, two of the biggest changes in cyber risk in the 2018 FM Global Resilience Index.

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. Cyber risk is one of 12 drivers determining the index’s overall resilience rankings.

Switzerland again holds the top spot in overall resilience in the index, followed by Luxembourg and Sweden—all the same as last year. Haiti is the bottom-ranked country followed by Venezuela and Nepal—also the same order as last year.

“Our mission is to give global business executives powerful intelligence to support their decisions about where to site facilities, what partners to select, and how to manage their risks,” said Thomas A. Lawson, chairman and chief executive officer at FM Global, one of the world’s largest commercial and industrial property insurers. “With the Resilience Index, business leaders can dig deeper than they ever have into geographical differences in resilience, including cyber risk.”

The index reflects data related to economics, natural hazards and supply chains, and addresses deep concerns about business risks such as cyber attacks, political upheaval, fire and hurricanes. Resilience, the flipside of risk, means resisting business disruption and rebounding quickly if it occurs.

Key Country Ratings

China region 1 (Coast)

China region 2 (North)

China region 3 (Central)

France

Germany

United Kingdom

U.S. region 1 (East)

U.S. region 2 (West)

U.S. region 3 (Central)

69

71

65

12

5

18

10

15

9

Civil Liberties Affect Cyber Risk

For global business leaders, cyber attacks raise the specter of stalled operations, disrupted supply chains, class-action lawsuits and permanent brand damage.

France fell 33 places in the cyber resilience dimension of this year’s index from 68th to 101st of 130 regions. The drop reflects a deterioration in civil liberties within the country rating and a slight uptick in the country’s internet penetration.

Internet penetration also 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.

Taiwan’s cyber resilience, on the other hand, soared 57 places from 107th to 50th, the biggest rise in the index, due in large part to an increase in its civil liberties.

As these examples show, different nations exhibit different cyber risks, according to Lawson. “Although the internet transcends national boundaries, users, businesses and defenses do not.”

U.S. Political Risk

The United States (all three of its regions) saw its rank in political resilience drop over the last year from 31st to 46th. The fall likely reflects a turbulent diplomatic climate intensified by North Korea’s nuclear threat and signs of Russian election meddling.

The political risk driver of the index draws on data from the World Bank and represents “perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including politically motivated violence and terrorism.”

Despite a fraught political climate, the United States remains a country with a resilient environment for business with its regions coming in 9th, 10th and 15th on the overall ranking—or the top 12 percent of all countries ranked.

When Businesses Burn

Fire remains the leading cause of property damage worldwide—and one of the most preventable ones. The Grenfell Tower fire in the United Kingdom (U.K.) was a particularly stark reminder of fire’s threat to life and property. Blamed on highly combustible materials and a lack of sprinklers, that disaster claimed 71 lives last June.

The index suggests that the U.K. has room for improvement in fire risk management. Though it ranks 18th overall for its resilience to business disruption, the U.K.remains at 34th in fire risk quality. Fire risk quality takes into account the quality and enforcement of a country’s building codes, along with a measure of the fire risk quality of actual facilities visited by FM Global’s property risk engineers.

Natural Hazards

Natural hazards are another concern for business executives as demonstrated by 2017’s Atlantic hurricane season, the most expensive on record. Hurricanes Harvey, Irma and Maria claimed hundreds of lives, cost an estimated US$265 billionand caught many executives less than fully prepared.

For companies with key facilities in regions exposed to such devastation, the lesson is clear: Build resilience through targeted investment in prevention and recovery programs. Geographies in the index with significant natural hazard exposure include China Region 1 (ranked 69th), the Philippines (88th), Japan(24th), Mexico (62nd) and U.S. Region 1 (ranked 10th).