Global electronics OEMs know that risk is always with them and that, often, mitigating for risk is a task of sorting through the possibilities to gauge the potential for trouble. Weather events and fires are always top of mind. Now, however, cyber risks and global politics are taking center stage in terms of challenging organizational resilience, the 2018 FM Global Resilience Index found.
“The Resilience Index is a window into the effect that lets you see the relative perceived resilience of an area,” said Ronnie Gibson, vice president, innovation at FM Global told EBN. “It can be used as a tool to make risk management decisions. Organizations can use the lens of the Resilience Index, figure out what’s important to their particular organization, and over lay that on the areas of the world where they have suppliers.”
In terms of resilience, organizations should understand what can be controlled and what cannot, Gibson added. “For example, if there’s a weather risk in one region, you can’t change that but you can decide whether you need an alternate supply,” he said. “It’s just good intelligence to help you decide what to do.” On the other hand, organizations can move the needle on quality of the supply chain.
Last year, hurricanes in the Atlantic caused disruption at record breaking levels, causing over $200 billion in damage in the United States, the report found. Hurricane Harvey, Hurricane Irma, and Hurricane Maria all made headlines. Storm damage worldwide is estimated at $370 billion, the second-costliest year since 1960, the report said.
Cyberattacks also posed a significant risk as organizations struggled to deal with WannaCry ransomware and then GoldenEye strain of Petya. “Both exploited the EternalBlue vulnerability of Microsoft and should serve as a wake-up call to any who remain in denial as to the ferocity and seeming randomness of a data breach,” the report said. “As innovation in technology inexorably continues, building cyber resilience has become an essential element of sound business management.”
Attacks on an organizations IT infrastructure and enterprise applications can lead to stalled operations, disrupted supply chains, class-action lawsuits, and permanent brand damage, making it an area of critical concern. Understandably, countries with higher internet penetration face a higher level of cyber risk, Gibson said. Inherent cyber risk climbed in France (the country fell 33 spots in terms of cyber resilience) over the past year while dropping in Taiwan (as the company rose 53 spots in terms of cyber resilience), two of the biggest changes in cyber risk in the index.
“For France, we’ve seen that civil liberties have adjusted a little and internet penetration has gone up,” said Gibson. “In 2015, terrorist activity in France led to a tightening of controls for getting in and out of the country.” On the political risk landscape, the United States dropped in the ranking from 31 to 46 in terms of political resilience, largely due to a turbulent diplomatic climate intensified by North Korea’s nuclear threat and signs of Russian election meddling. However, the U.S. still ranks in the top 12% of all countries ranked in terms of overall resiliency.
Switzerland, Luxembourg, and Sweden took the top spots in this year’s ranking. Switzerland distinguishes itself for high quality infrastructure and local suppliers, a stable political climate, and economic productivity. Luxembourg achieved high scores for economic productivity, political stability, low corruption levels, and low exposure to natural hazards. Finally, Sweden stands out for high supply chain visibility (the ability to track and trace consignments across the supply chain), as well as quality of local suppliers and low levels of corruption.
Haiti, Venezuela and Nepal were at the bottom of the list, with each being notably prone to weather events. Haiti is plagued by limited economic means and huge explore to natural hazards such as hurricanes. Venezuela, meanwhile, has exposure to wind and earthquake damage. The country also struggles with prevalent corruption and a dependency on oil for income. Heavily exposed to earthquake risk, Nepalalso experiences a high rate of urbanization.
The index ranks 130 countries worldwide in terms of resilience based on a dozen global drivers and risk for exposure to natural hazards, natural hazard risk quality, and fire risk quality. The ranking uses a variety of data sources including the International Monetary Fund (IMF), the World Bank, the World Economic Forum (WEF), U.S. Energy Information Administration (EIA), the United Nations, and Freedom House. It also takes into account proprietary data, generated by FM Global’s 1,800 property risk engineers who evaluate more than 100,000 locations annually around the world.
— Hailey Lynne McKeefry, Editor in Chief, EBN