The office — FM Global’s third Australian office and first on the West Coast — is located at St Georges Terrace and will help cater to the unique needs of FM Global’s clients in the region.

FM Global has a long history of building partnerships. Last year, FM Global celebrated 50 years since the global business, headquartered in the United States, came to Australia to service existing clients who had opened operations in the country. 

Andrew Stafford, Operations Senior Vice President Australia and New Zealand, said: “The expansion into Western Australia is a significant milestone for FM Global, reinforcing our position as a global leader in commercial property insurance and risk management and strengthening our relationships with clients, brokers and partners.

“We’ve always believed in the power of listening to our clients, and this expansion directly responds to their need for closer contact and support in the region. We are here to help businesses manage risk more effectively and empower them to build resilience.”

The new office and two new senior hires in Perth will bolster FM Global’s consultant field engineers, who have been based in the region for more than two decades, providing valuable local engineering support.

Anthony Brown has been appointed Account Manager, and Scott Chapman has been appointed Account Engineer to support clients in understanding their exposures.

Mr Brown is a seasoned professional with extensive experience in the insurance industry, most recently serving as a senior loss adjustor at Charles Taylor Adjusting. He previously worked in the civil construction and mining industries in Australia, the United Kingdom and the United Arab Emirates.

Mr Chapman has partnered closely with FM Global clients across sectors. Based in Western Australia for the past five years, he brings a wealth of experience and understanding of the local market.

FM Global’s expertise is backed by science from nearly 200 years of property insurance experience. The company comprises a team of over 1,200 engineers who use research conducted exclusively for property risk to build resilience and deliver the best solutions to clients.

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The annual index, published by FM Global, one of the world’s largest commercial property insurers, is the only definitive global ranking of nearly 130 countries and territories by the resilience of their business environments. It provides companies with objective information about countries’ economic, risk quality and supply chain resilience – factors that can affect businesses’ ability to rebound from COVID-19.

At a time when the world has been shocked by a pandemic and resilience has never been more critical, Australia ranked 17th overall in this year’s index. Countries’ rankings are derived from 12 measures that address business concerns around such vulnerabilities as natural hazards, cyber threats, political and economic risk. The complete data is available here.

Strong supply chain and fire risk quality

Australia was recognised for its strength in a number of drivers related to supply chain resilience including control of corruption (ranked 14), supply chain visibility (ranked 22) and quality of infrastructure (ranked 31). These highlight the quality of the country’s transport, telephony and energy infrastructure, as well as the country’s ability to track and trace consignments across its supply chain. With recent bush fires still top of mind for many people, Australia ranked highly for its fire risk quality (ranked 7) and natural hazard risk quality (ranked 15), acknowledging, in part, the country’s quality and enforcement of building codes with respect to natural hazard-resistant design. This driver of resilience is critically important for businesses with operations located in regions affected by natural hazards, such as flood and bushfires.

Lynette Schultheis, Operations Manager, FM Global Australia says, “The pandemic has brought many businesses to a standstill and caused significant disruption and uncertainty to the future of global economies. Australia has not been immune. However, it is encouraging to see that steps taken to date to mitigate our risk across a number of key areas have placed the countries’ businesses on a strong footing, as they look to recover from this unprecedented economic and operational shock.”

Managing supply chain disruption

Where there may be cause for concern is for the many businesses who have extended their supply chains into neighbouring countries across Asia to reduce costs and increase competitiveness. In addition to supply chain disruption and operational risk that many local businesses have been subject to as a result of the pandemic, a number of major manufacturing hubs in the Asia Pacific region ranked poorly for a number of drivers of supply chain resilience, as illustrated in the table below:

With regard to supply chain resilience specifically, Australia’s largest trading partner, China (which is subdivided into three ranked regions because its geographical spread includes disparate natural hazards such as wind, flood and earthquake) significantly improved its corporate governance from last year’s ranking (from 98 to 74), indicating greater scrutiny of auditing and accounting standards, conflict of interest regulation and shareholder governance. However, the country’s quality of infrastructure dropped slightly (from 31 to 38), indicating possible vulnerabilities in this integral aspect of global supply chain resilience. In regard to China’s natural hazards exposure, China region 2 is the most exposed (ranked 75), followed by China region 1 (ranked 69) and China region 3 (ranked 59)^[1].

“The globalisation of many industries such as manufacturing has created a level of complexity which can leave business leaders unprepared for significant disruption in supply chains, and for the potential financial, legal and reputational risks that result. This pandemic should reinforce the importance of striking a better balance between cost-effectiveness and a diversified supply chain. This starts with taking into consideration all the potential risk factors involved with a given business partner and country-level resilience is a big part of that,” Schultheis says.

Conventional yet critical

The FM Global Resilience Index stands as a reminder that more conventional business risks, including cyberattacks, continue to threaten operations and overall value, and should not be overlooked amid the response to the pandemic. Australia’s overall resilience ranking was held back by its inherent cyber risk (ranked 48), oil intensity (ranked 93) and corporate governance (ranked 41). This reinforces the importance of business leaders assessing their level of exposure to other risk factors and developing clear steps to mitigate potential disruption.

Business leaders must also remain alert to the natural hazard exposure (the percentage of a country’s area devoted to economic activities that is exposed to at least one natural hazard) of its regional trading partners which has the potential to cause significant disruption to extended supply chains. In regards to natural hazard exposure Singapore ranked 111, Japan ranked 101, Taiwan ranked 100, Hong Kong ranked 95 and South Korea ranked 98.

“This pandemic and FM Global’s experience highlight the far-reaching, long-lasting effects on business value and performance that a lack of resilience can bring. It’s clear that businesses must look more broadly at their continuity plans and use data-driven tools to develop more robust strategies.

“The FM Global Resilience Index is one such tool; designed to provide business leaders, including chief financial officers, with this kind of powerful intelligence to support their decisions surrounding operational resilience and effective risk management. The Index can provide critical insights for businesses making strategic decisions as they site facilities, extend supply chains and cultivate new markets,” Schultheis adds.

Global leaders and laggards

Norway continues to occupy the top spot in the 2020 Resilience Index due to its strong economic productivity, a stable political environment, low corruption, high natural hazard risk quality and robust corporate governance. While the country ranks first overall, it ranked below average for inherent cyber risk (ranked 83), highlighting that no country is entirely resilient.

The bottom 10 countries when ranked for overall resilience (in descending order) are Nicaragua, Nepal, Mali, Mozambique, Iran, Lebanon, Chad, Ethiopia, Venezuela and Haiti.

———

[1] Further details about which areas in China fall into which grouping are provided in the methodology.

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This year’s Index reveals Australia is ranked 17th overall out of 130 countries and territories, according to the resilience of its business environment. The rankings are derived from 12 economic, risk quality and supply-chain related measures to address business concerns around such things as natural hazards, cyber threats, political and economic risk. The complete data is available publicly at www.fmglobal.com/resilienceindex.

Australia was recognised for its high natural hazard risk quality (ranked 15th) due to the quality and enforcement of its building codes with respect to natural hazards like floods and bushfires. It ranked eighth for the quality of its fire risk management due to the quality and enforcement of building codes with respect to fire-based design.

The country was also recognised for higher control of corruption (ranked 14th) and supply chain visibility (ranked 22nd).

Australia’s overall rank in the Index was held back by its inherent cyber risk (ranked 62nd), placing the country towards the bottom of the second quartile. This reinforces the need for business leaders to assess their level of cyber exposure as well as develop clear, actionable steps to mitigate cyber risk and avoid business interruption.

Managing risk in the global supply chain

Today, most Australian-based businesses tap supply chains that extend far beyond Australia, predominantly into neighbouring countries located in Asia.

Four contributors to the resilience of a country’s business environment include supply chain visibility, control of corruption, quality of infrastructure and corporate governance. Those countries that ranked poorly in that regard include many major global manufacturing hubs as illustrated in the table below:

Lynette Schultheis, Operations Manager at FM Global said, “While many Australian-based businesses have moved their supply chains into Asia to make them more competitive, few have mapped the vulnerabilities that their supply chains are now exposed to. This means too few businesses understand the potential political, financial, legal and reputational risks they may have unintentionally exposed themselves to and now must face and overcome”.

Furthermore, the potential for severe disruption across global supply chains from natural disasters such as typhoons, floods and bushfires is considerable. Key manufacturing hubs located in Asia, such as Bangladesh and Sri Lanka, both are ranked equally (#112) for natural hazard exposure. Vietnam ranked last (#130) for natural hazard risk quality, due to poorer quality and enforcement of building codes with respect to natural hazard-resistant design.

“The FM Global Resilience Index is designed to provide business leaders, including chief financial officers, with powerful intelligence to support their decisions surrounding operational resilience and effective risk management. It enables businesses to decide where to site new facilities or expand existing ones, extend their supply chains, evaluate established supply chains and identify potentially vulnerable customers. FM Global’s experience indicates that a lack of resilience can have far-reaching, long-lasting effects on business value and performance”, Schultheis added.

Global leaders

Overall, Norway and Denmark ranked first and second, respectively, in the 2019 FM Global Resilience Index. Norway’s top spot is attributable to its quality of corporate governance (ranked sixth) and high control of corruption (ranked second), economic productivity (ranked sixth) and low political risk (ranked eighth). Denmark was held back by its inherent cyber risk (ranked 95th). This is the sixth consecutive year of the annual FM Global Resilience Index.

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That according to a new FM Global whitepaper, Master the Disaster: Why CFOs Must Initiate Natural Catastrophe Preparedness in 2019 and Beyond, based on an analysis of 10-K filings of nearly 100 public companies, many of which suffered property damage and business disruption from hurricanes in 2017. Notable losses ranged from a few million to hundreds of millions of dollars (USD).

“Were [CFOs] to conduct a more systematic cost-benefit analysis of natural disaster risk preparedness, they would realize that allocating capital toward loss prevention provides significant long-term returns,” Wharton professor Howard Kunreuther said in the whitepaper.

With institutional investors saying enhanced reporting of natural disaster risks has become a priority, Kevin Ingram, executive vice president and CFO at FM Global, notes, “If the CFO doesn’t lead the charge to invest in reducing natural-hazards exposures, they will be the ones that stakeholders hold accountable for not properly addressing the risks.”

The whitepaper includes the viewpoints of other business risk analysts who say the growing CFO responsibility is not going away in an era of increasing business concerns over climate change risk and disclosure.

Former economist Robert Hartwig, director of the Risk and Uncertainty Management Center at the University of South Carolina, said he expects natural disasters to “get lots of ink in future financial filings because I don’t think they’re currently getting the attention they’re due.

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