2015 Innovation Awards: FM GlobalPosted On: Mar. 1, 2015 12:00 AM CST
Multinational firms have a difficult task quantifying where their major risks exist, the nature of gaps in their protections and where the risk management focus ought to be placed.
Jon Hall, Johnston, Rhode Island-based chief operating officer at FM Global, said about 75% of the insurer's roughly 2,000 clients are multinational firms.
“We have a client base with huge exposures in faraway places, and we thought, "How can we give them tools?' “
So the commercial insurer spent a year with analysts scouring data from 130 countries and territories around the world and last year introduced its Resilience Index, an online tool that assigns a score of zero to 100 in nine categories — such as economic performance and supply chain risks— to provide an overall score that developers say will help decision-makers.
The Resilience Index gives companies a simple way to analyze their international risks, Mr. Hall said.
“If people understand the hazards they face, they'll make good decisions,” he said. “Most of the time when things happened, people didn't understand the hazards. This goes back to the hallmark of our business, which is helping our clients understand the hazards.”
The index provides users with country-level insights into the risks and vulnerabilities facing suppliers and customers as well as data to support risk management and business decisions.
For example, developed countries such as Norway, Switzerland and Canada top the scoring as the most resilient nations in the overall index, while nations such as Thailand, Pakistan and Bangladesh, which often are used by manufacturers, are in the lower half of the ranking.
Since its introduction last summer, the website has seen 12,000 users, 40% of which were repeat visitors, Mr. Hall said.
While the idea for the Resilience Index grew from the needs of FM Global's clients, Oxford Metrica Ltd., an Oxford, England-based analytics and advisory firm hired by FM Global, actually devised the index, a 2015 Business Insurance Innovation Awards winner.
The analysis of 130 nations and territories “started with a blank piece of paper,” said Deborah Pretty, Oxford-based principal at Oxford Metrica. “From there we started by identifying all the threats to supply chains. We looked at 38 threats that could affect a country's resilience. From there we started modeling and examined the threats that came up more often in our research, what we saw as dominant variables. Then we modeled the different variables to see which ones correlated, from political risk to terrorism risk.”
The monumental analysis took the work of about two dozen people, including FM Global engineers, software developers, mathematical analysts and specialists, she said.
“It was FM Global that had the foresight to invest in this,” Ms. Pretty said.
The index is available to the public and will be updated annually, taking into account political and natural events, she said.
The latest update of the FM Global Risk Index is set for later this month.