The wisdom of resilience?

  • Ronnie Gibson, Vice President, Innovation Business & Insurance FM Global

We know that in business, as in life, there are things we can control and there are things we can’t. 

While there’s not much point in stressing over what we can’t control, it’s always better to move forward with our eyes wide open. That’s what was on my mind when I spent several years helping FM Global to develop the Resilience Index

The FM Global Resilience Index is a simple tool that ranks countries from one to 130 based on enterprise business resilience, with a view to helping executives and professionals make informed strategic risk management decisions. As I shared with attendees at the RIMS Australasia conference last week, it’s especially helpful for companies that may be expanding out of their home territory or extending their business interests abroad. 

The tool is global, updated annually and available to the public. It allows business decision-makers to get a clear view of the risks inherent in business environments across 130 countries. That insight can be crucial if you’re evaluating locations for expansion plans, determining the risks to particular business operations, or selecting international business partners and/or suppliers.

Ultimately, business priorities may mean that we have little choice about where we source certain materials or locate a facility. We may have to go ahead despite the risks. However, I believe it’s always better to make those decisions being fully aware of the risks associated with the territories involved, and use those insights to prepare for and mitigate them. 

The broad categories of risk included in the Resilience Index are economic, supply chain, and risk quality. Economic risk is made up of factors that are typically beyond our direct businesses’ control, such as oil intensity, political risk, productivity and urbanisation rates; supply chain risk includes supply chain visibility, control of corruption, quality of infrastructure and corporate governance; while risk quality covers factors such as exposure to natural hazard, natural hazard risk quality, fire risk quality and inherent cyber risk that can be proactively managed by businesses. 

Collectively, these drivers paint a comprehensive picture of the risk environment in which a facility is operating within. Of the 12 drivers, nine of them are data referenced from other reputable global institutions such as the International Monetary Fund and the World Bank. Each could be accessed individually, but the Resilience Index collates each, mathematically normalizes it, and presents a composite ranking that’s easy to understand, and has the breadth and depth to be a useful strategic decision-making tool.

Among the measures directly developed by FM Global are fire risk quality and inherent cyber risk, and they (in turn) are largely computed through third-party attributes. For example, for fire risk quality, we asked three questions: does the country have a building code that relates to fire risk quality, how comprehensive is it, and how rigorously is it enforced? 

I encourage anyone to check out the index. Think of it as a change management and enterprise risk management tool for the C-suite. One that combines all the best information to provide a truly comprehensive overview of risk across international environments, whether it’s geographic, legal, financial or cyber-related. It’s a complex world out there and it can be hard to decipher the many indicators of risk. One option is to use a normalized composite index to cut through that complexity.

The information is out there. As I reminded my friends at RIMS Australasia: Resilience is a choice – choose wisely, with your eyes open, with tools like the Resilience Index.