Global Business Risk Report Q3 2021

Key Global Risks for Businesses

The Dun & Bradstreet Global Business Risk Report (GBRR) ranks the biggest threats to business based on each risk scenario’s potential impact on companies, assigning a score to each risk. The scores from the top ten risks are used to calculate an overall Global Business Impact (GBI) score.

Our latest GBI score eased to 282.5 in Q3 2021, following the sharp deterioration in the previous quarter, indicating that the outlook for doing cross-border business, although still very challenging, has improved.

Global business risks improve slightly

In Q3 2021, Dun & Bradstreet’s GBI score eased slightly to 282.5, down from 300 in Q2 2021 and the recent highs of 332 experienced in Q2 and Q3 2020. The GBI score is below the levels seen throughout 2020 but is above the long-term average of 267.0. This highlights the high level of uncertainty facing businesses that operate cross-border.

Methodology

Our top ten risks are based on the expertise of Dun & Bradstreet’s team of economists, who cover 132 countries accounting for over 99% of global GDP. They assess the key risks emanating from their region or pan-regionally. Each risk is calculated by combining an assessment of: (i) the magnitude of the event’s probable effect on the global business operating environment, on a scale of 1 to 5 (where 1 is the smallest impact and 5 is the largest); and (ii) the likelihood of the event happening (out of 100). The maximum GBI score for each of the 10 risks is 100 and therefore maximum possible score for the overall GBI is 1000. In the report, each risk is categorised into a broad category.

Four new risks in the global top ten

Of the ten risks, two are due to political factors, one to technological issues and the remaining seven are related to the Covid-19 pandemic, highlighting its extreme, unique and far-reaching effects. The impacts of the Covid-19 pandemic can be sub-divided into different types of risks: economic (4), supply chain (2) and political (1) issues.

Highlighting the rapidly changing global business environment, we have four new risks in our top ten. The four new-entry risks are:

  1. The far-right wins the 2022 French presidential election, leading to concerns about the integrity of the euro zone (GBI of 24);
  2. Countries and territories in Asia-Pacific suffer a substantial deterioration in fortunes due to ultra-high-infectivity variants, with disruption spreading from services into manufacturing and reversing the recovery in Southeast Asia. Slow progress of vaccination in Japan and South Korea depresses consumption and services into late 2022, but in Indonesia, Malaysia, Thailand brings a more serious hiatus in activity and impairs living standards more than in 2020 (GBI of 24);
  3. Disruption to manufacturing and logistics across the Asia-Pacific region from worker absences and illness, inventory shortages, lack of exemptions from epidemic controls and border issues further increases freight and input costs past previously imaginable peaks, with China/Asia-US benchmark freight indices per forty-foot equivalent unit including surcharges passing the USD25,000 mark by end-Q3 (GBI of 24); and
  4. Technological threats, predominantly driven by artificial intelligence, lead to economic damage and geopolitical risks. Threats of cyber-attacks, data theft, fraudulent activities by state and non-state actors, and the risks of outages of information and networks rise continuously, thereby undermining the global business environment (GBI of 22.5).

The Dun & Bradstreet Global Business Impact score for Q3 2021 indicates that the risks confronting businesses have eased slightly but remain elevated.
 

Among the six pre-existing risks in our top ten, two have seen their scores ease, indicating lower risk, while two have worsened, with two remaining the same. In terms of geographies, six are pan-regional (including the top four risks), while two stem from Asia-Pacific and one each from North America and West and Central Europe.

The widespread basis of the risks highlighted in this report reinforce the fact that finance, procurement and supply chain teams across all business sectors need to combat the impacts of an increasingly complex and globalised world. As explained below, this is where Dun & Bradstreet can help.

 

The economic worries associated with Covid-19

Four of our top ten risks relate to how the Covid-19 pandemic will continue to undermine business activity and markets, lowering confidence and raising risk premia, as well as putting pressure on the banking sector as insolvencies and non-performing loans rise into the medium term.

1. Fiscal emergency: In equal first place is our concern that the global pandemic with its impacts on profits, employment and tax revenues, brings an unprecedented fiscal emergency in emerging markets that extends into 2022, damaging their sovereign creditworthiness into the medium term. The pan-regional risk has a GBI of 40, down from 44 in the previous report.

2. Credit squeeze: In equal third place with a GBI of 30, up from 24 in the previous report, is another pan-regional risk. This relates to a rise in both insolvencies and non-performing loans in 2021 and 2022 as a result of the pandemic, which impact adversely on the global banking sector, leading to a credit squeeze for businesses.

3. Equity valuations hit: In equal fourth place is our concern that global equity valuations deteriorate as it becomes clear that depressed productivity levels in urban areas (due to indefinite social-distancing) mean that leading economies will struggle for years to return to normality. This pan-regional risk has a GBI of 30; the same as in the previous report.

4. Asia-Pacific businesses hit: Countries and territories in the region suffer a substantial deterioration in fortunes due to ultra-high-infectivity variants, with disruption spreading from services into manufacturing and reversing the recovery in Southeast Asia. Slow progress of vaccination in Japan and South Korea depresses consumption and services into late 2022, but in Indonesia, Malaysia, Thailand brings a more serious hiatus in activity and impairs living standards more than in 2020. This new entry has a GBI of 24 and is in equal fifth place.

Covid-19 raises supply chain concerns

Two risks associated with Covid-19 in the latest top ten are related to supply chain issues that increase the risks for doing cross-border business.

5. Distribution failure: The inability to quickly distribute approved Covid-19 vaccines to a critical mass of individuals in the emerging economies results in the emergence of new vaccine-resistant variants, resulting in new lockdowns and a prolonged period of recovery and long-term economic scarring. This pan-regional risk is in equal first place with a GBI of 40, up from 36 in the previous report.

6. Supply side difficulties: Disruption to manufacturing and logistics across the Asia-Pacific region from worker absences and illness, inventory shortages, lack of exemptions from epidemic controls and border issues further increases freight and input costs past previously imaginable peaks, with China/Asia-US benchmark freight indices per forty-foot equivalent unit including surcharges passing the USD25,000 mark by end-Q3. This risk emanating from Asia-Pacific is a new entry in equal fifth place with a GBI of 24.

The political impact of Covid-19

The final risk associated with Covid-19 in the latest top ten is related to political aspects which undermine the global business operating environment.

7. Populism and anti-government protests: This pan-regional risk has a GBI of 30 (the same as in the previous report) and is in equal fifth place. This risk relates to the fallout from Covid-19 raising long-term unemployment significantly, heralding populist governments with nationalist identities in the democracies, and increased anti-government protests in authoritarian countries; with both impacting negatively on the global business operating environment.

Politics raise risks

There are two political, non-Covid-19 associated risks in our top ten.

8. US restrictions hit trade and investment: In equal fifth place with a GBI of 24 (the same as in the previous report) is our first non-Covid political risk. This emanates from the US where hardened technology and trade restrictions undermine US-China relations, forcing developing countries reliant on the two economic powerhouses to strike a delicate balance in their trade and investment dealings.

9. French election concerns: The second political factor is that the far-right wins the 2022 French presidential election, leading to concerns about the integrity of the euro zone. This new entry from West and Central Europe is in in equal fifth place with a GBI of 24.

Technological threats cause concerns

The final risk in the latest Global Business Risk Report is related to technology.
 
10. Illegal activities are boosted by technology: Technological threats, predominantly driven by artificial intelligence, lead to economic damage and geopolitical risks. Threats of cyber-attacks, data theft, fraudulent activities by state and non-state actors, and the risks of outages of information and networks rise continuously, thereby undermining the global business environment. This pan-regional new entry is in 10th place with a GBI of 22.5.
 

What this means for businesses

The latest GBI score highlights that despite the roll-out of vaccines, the Covid-19 pandemic is keeping the business operating environment at a challenging level.
 

Dun & Bradstreet’s Global Business Impact score for Q3 2021 shows that the risks confronting businesses remain elevated, albeit the score fell from Q2 2021 and is below the record highs experienced in Q2 and Q3 2020 but above the long-term average. The outbreak of Covid-19 and attempts to control its spread while mitigating the impact on business activity, sovereign finances and societal tensions, has elevated risks: the outbreak illustrates how unexpected events can suddenly worsen the risk environment for businesses operating cross-border. Political and technological factors are also an important driver of risk in the Q3 2021 GBRR.

 

The Q3 2021 score highlights that business decision-makers need to have contingency plans in place for the sudden disruption of seemingly secure supply chains. Furthermore, the geographical spread and diversity of the impacts in our top ten underline the importance of taking a broad approach to mitigating risks.

How Dun & Bradstreet can help

Dun & Bradstreet, a leading global provider of B2B data, insights and AI-driven platforms, helps companies around the world grow and thrive. Dun & Bradstreet’s Data Cloud contains data and insights on over 420 million businesses from around the world, fuelling solutions that help customers to accelerate revenue, lower cost, mitigate risk, and be better corporate citizens. As this report highlights, risks are ever evolving in terms of types and geographies and can also be unexpected. The impacts are felt across the business spectrum - from sole proprietors to multi-national corporations. What is different is the magnitude to which these businesses are affected. The key to sustain, grow and thrive during these times is to leverage data to turn risks into opportunity. We recommend that business leaders:

  1. Assess macro- and micro-level risks
    • Monitoring country, sector and counter-party risks through reports such as this one can help businesses create better strategic plans to limit payment delinquency, guide cash-flow management decisions, and strengthen supply chain resilience.
    • Dun & Bradstreet’s Finance Analytics and Risk Analytics solutions help automate some risk decisions, as well as accelerate supplier due diligence and help with compliance screening.
    • Our COVID-19 Recovery Index can also help gauge recovery in consumer demand, and business stability while highlighting potential growth areas.
  2. Maximise profitability with data, insights and automation
    • Dun & Bradstreet’s Finance and Risk solutions can help businesses to use rich, actionable data to drive growth while improving efficiency, agility and decision-making capability.
    • Dun & Bradstreet’s COVID-19 Impact Index can help businesses identify the pandemic’s changing effects on locations, industries, and supplier and customer networks to improve cash-flow management and plan for post-pandemic profitability.
  3. Pivot nimbly
    • Our enterprise-wide range of software solutions to address various business use cases leverage data and insights from our Data Cloud and bring automated intelligence to help with agility, even in challenging environments.
      a. identify and engage with the right sales targets
      b. drive intelligent actions to manage credit-to-cash and third-party risk
      c. small/medium business management
      d. insights to advance public sector missions and help citizens thrive
  4. Keep pace with fundamental changes in your industry
    • The pandemic has accelerated changes that were already underway, such as remote working, the expansion of e-commerce and an increase in cashless transactions. Staying connected to meaningful changes is crucial in a climate of ongoing volatility and uncertainty.
    • D&B Hoovers helps sales teams select the best targets and then understand those companies’ evolving needs and rapidly-changing environments.
  5. Maintain an integrated global perspective
    • A global view enables mitigation of emerging cross-border risks, and the ability to grasp growth opportunities, wherever they are, in a timely way.
    • Dun & Bradstreet’s Country Insight Reports provide forecasts and business recommendations for 132 economies, allowing businesses to monitor and respond to economic, commercial and political risks in the markets in which they operate.

Dun & Bradstreet’s global data and analytical insights and our AI-driven software platforms can help businesses navigate short-term crises and support long-term growth efforts. Please contact your Dun & Bradstreet Account Manager today to learn how our solutions can help you manage risk and find opportunity.

 

Top ten risks

Ranking Region Risk Likelihood of Event (%) Global Impact (1-5) Global Business Impact Score (1-100)
=1 Pan-regional The inability to quickly distribute approved Covid-19 vaccines to a critical mass of individuals in the emerging economies results in the emergence of new vaccine-resistant variants, resulting in new lockdowns and a prolonged period of recovery and long-term economic scarring. 50 4 40
=1 Pan-regional The global pandemic with its impacts on profits, employment and tax revenues, brings an unprecedented fiscal emergency in emerging markets that extends into 2022, damaging their sovereign creditworthiness into the medium term. 50 4 40
=3 Pan-regional The fallout from Covid-19 raises long-term unemployment significantly, heralding populist governments with nationalist identities in the democracies, and increased anti-government protests in authoritarian countries; with both impacting negatively on the global business operating environment. 50 3 30
=3 Pan-regional A rise in insolvencies and non-performing loans in 2021 and 2022 impacts adversely on the global banking sector leading to a credit squeeze for businesses. 50 3 30
=5 North America US-China relations deteriorate, with hardened US technology and trade restrictions forcing developing countries reliant on the two economic powerhouses to strike a delicate balance in their trade and investment dealings. 40 3 24
=5 West & Central Europe The far-right wins the 2022 French presidential election, leading to concerns about the integrity of the euro zone. 30 4 24
=5 Pan-regional Global equity valuations deteriorate as it becomes clear that depressed productivity levels in urban areas (due to indefinite social-distancing) mean that leading economies will struggle for years to return to normality. 40 3 24
=5 Asia Pacific Countries and territories in the region suffer a substantial deterioration in fortunes due to ultra-high-infectivity variants, with disruption spreading from services into manufacturing and reversing the recovery in Southeast Asia. Slow progress of vaccination in Japan and South Korea depresses consumption and services into late 2022, but in Indonesia, Malaysia, Thailand brings a more serious hiatus in activity and impairs living standards more than in 2020. 60 2 24
=5 Asia Pacific Disruption to manufacturing and logistics across the region from worker absences and illness, inventory shortages, lack of exemptions from epidemic controls and border issues further increases freight and input costs past previously imaginable peaks, with China/Asia-US benchmark freight indices per forty-foot equivalent unit including surcharges passing the USD25,000 mark by end-Q3. 60 2 24
10 Pan-regional Technological threats, predominantly driven by artificial intelligence, lead to economic damage and geopolitical risks. Threats of cyber-attacks, data theft, fraudulent activities by state and non-state actors, and the risks of outages of information and networks rise continuously, thereby undermining the global business environment. 90 1.25 22.5