Venezuela Rated Riskiest Country for Business

A devalued currency, rampant inflation, and shortages of goods from milk to cars make Venezuela the world’s worst location for corporations to do business and to locate their supply chains, according to a risk report issued by FM Global.

The commercial property insurer FM Global ranked 130 countries based such factors as their economic growth, political risk, exposure to natural hazards, risk management, infrastructure and control of corruption. Venezuela’s access to oil was the one positive feature against a list of negatives.

Ukraine, which has been embroiled in a conflict with Russia over the past 12 months and suffered a prolonged recession, saw its ranking fall the most from last year’s report. Next came Thailand, which suffered major flooding in 2011 that disrupted supply chains and affected computer hard-drive production around the world.

FM Global began publishing its rankings last year in order to provide clients with a sense of the risks that could affect their far-flung businesses, said Bret Ahnel, vice president of staff operations at the insurer.

He said that Thailand has done little to strengthen its infrastructure since the 2011 flood and is struggling with a weak supply network.

Norway ranked as the least-risky country in the world, followed by Switzerland and the Netherlands. The best non-European country was Qatar, ranked seventh, followed by Canada at eighth. FM Global splits the US into three regions, as the country’s size means different areas are exposes to different natural hazards. The central states ranked highest, in 10th position.

At the bottom of the rankings, the Kyrgyz Republic, Mauritania and Nicaragua were just above Venezuela.

US companies such as General Mills, Goodyear Tire & Rubber and Ford Motor have cited Venezuela as a financial concern for their earnings in recent reports. Ford, for example, took an US$800m pre-tax charge in the fourth quarter related to the devaluation of the Venezuelan bolivar (VEF).

Ahnell said that more multinationals have become aware of risks to their businesses and have responded by bringing their supply chains closer to their home markets. US companies such as Whirlpool Corp and General Electric have moved some production back home.

Further details on FM Global’s resilience index can be accessed
here
.

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