Global Business Risk Report Q2 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 climbed sharply to 300 in Q2 2021, reversing the improving trend seen in the previous two quarters, indicating that the outlook for doing cross-border business has become even more challenging.

Global business risks worsen

In Q2 2021, Dun & Bradstreet’s GBI score worsened sharply to 300, up from 269 in Q1 2021 and reversing the improving trend seen in the previous two quarters. Although the GBI score remains below the levels seen throughout 2020, it is above the long-term average of 266.5. This highlights the extreme 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.

Five new risks in the global top ten

Of the ten risks, three are due to political factors 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 (3), political (2), and supply chain issues (2).

Highlighting the rapidly-changing global business environment, we have five new risks in our top ten. The five new-entry risks, three of which are political and two are due to Covid-19, are:

  1. The restraints on crew availability, on-boarding and repatriation at sea become so intense and severe as to cause a breakdown in maritime transportation affecting all sectors, as a result of the infection in fleets from emerging markets with severe uncontrolled pandemics - foremost India - and ports' barring of ships deemed at risk. General cargo deliveries, as opposed to bulk or container shipping, such as of bagged products like rice, become almost impossible as they require port staff to enter ships in large number (GBI of 36, out of a maximum 100);
  2. Re-impositions of tighter restrictions on mobility, including provincial/state lockdowns and border closures to contain the latest Covid-19 surges, sap rebound momentum and weaken already-fragile recoveries (GBI of 28);
  3. In Latin America protests by port workers and others in export-oriented sectors including commodities exacerbate global supply chain disruption, contributing to shortages and rising input prices (GBI of 24);
  4. 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 (GBI of 24); and
  5. Growing public agitation in both advanced and emerging economies, against negative environmental and social impacts of large-scale projects, delay implementation and lead to deferred investments - particularly in the extractive sector (GBI of 24).

The Dun & Bradstreet Global Business Impact score for Q2 2021 indicates that the risks confronting businesses, already elevated, have risen again.
 

Among the five pre-existing risks in our top ten, two have seen their scores ease, indicating lower risk, while one has worsened, with two remaining the same. In terms of geographies, eight are pan-regional (including the top six risks), while one stems from each of North America and Latin America.

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

Three of our top ten risks relate to how the Covid-19 pandemic will continue to undermine 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 first place, with a GBI score of 44 (down from 48 in the previous report), is the pan-regional risk that the global pandemic - which is affecting emerging-market and advanced countries alike with its impacts on profits, employment and tax revenues - brings an unprecedented fiscal emergency, damaging all grades of sovereign creditworthiness into the medium term.

2. 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.

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

Covid-19 raises supply chain concerns

Two further 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..

4. Maritime trade hit hard: The first of these risks relates to our concern that the restraints on crew availability, on-boarding and repatriation at sea become so intense and severe as to cause a breakdown in maritime transportation affecting all sectors, as a result of the infection in fleets from emerging markets with severe uncontrolled pandemics - foremost India - and ports’ barring of ships deemed at risk. General cargo deliveries, as opposed to bulk or container shipping, such as of bagged products like rice, become almost impossible as they require port staff to enter ships in large numbers. This pan-regional risk is a new entry in equal second place with a GBI of 36.

5. Distribution failure: The second supply chain risk is also pan-regional, has a GBI of 36 (up from 24 in the previous report) and is in equal second place. This is related to the potential inability to quickly distribute approved Covid-19 vaccines to a critical mass of individuals in the emerging economies, which would result in a prolonged period of recovery and long-term economic scarring.

The political impact of Covid-19

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

6. Populism and anti-government protests: The first political risk is pan-regional, has a GBI of 30 (the same as in the previous report) and is in equal fourth 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.

7. More lockdowns: The second of these risks relates to our concern that re-impositions of tighter restrictions on mobility, including provincial/state lockdowns and border closures to contain the latest Covid-19 surges, sap rebound momentum and weaken already-fragile recoveries. This pan-regional risk is a new entry in sixth place with a GBI of 28.

Politics raise risks

There are three political, non-Covid-19 associated risks in our top ten, all of which are new entries.

8. Protests to disrupt supply chains: The first of our political concerns is that in Latin America protests by port workers and others in export-oriented sectors including commodities exacerbate global supply chain disruption, contributing to shortages and rising input prices. This risk has a GBI of 24 and is in equal seventh place.

9. US restrictions hit trade and investment: Also in equal seventh place with a GBI of 24 is our second 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.

10. Environmental protests curtail investment: The final political factor is that growing public agitation against negative environmental and social impacts of large-scale projects delay implementation and lead to deferred investments - particularly in the extractive sector. This risk is in in equal seventh place with a GBI of 24.

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 Q2 2021 shows that the risks confronting businesses remain elevated, albeit 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 factors are also an important driver of risk in the Q2 2021 GBRR.

 

The Q2 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 over 420 million entities, fuelling solutions and delivering insights that help customers to accelerate revenue, lower cost, mitigate risk, and transform their businesses. 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 strongly recommend that business leaders:

  1. Assess macro- and micro-level risks
    • Monitoring country, sector and counter-party risks will 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 use-case specific solutions leverage analytics 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 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. 55 4 44
=2 Pan-regional The restraints on crew availability, on-boarding and repatriation at sea become so intense and severe as to cause a breakdown in maritime transportation affecting all sectors, as a result of the infection in fleets from emerging markets with severe uncontrolled pandemics - foremost India - and ports' barring of ships deemed at risk. General cargo deliveries, as opposed to bulk or container shipping, such as of bagged products like rice, become almost impossible as they require port staff to enter ships in large numbers. 60 3 36
=2 Pan-regional The inability to quickly distribute approved Covid-19 vaccines to a critical mass of individuals in the emerging economies results in a prolonged period of recovery and long-term economic scarring. 60 3 36
=4 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. 50 3 30
=4 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
6 Pan-regional Re-impositions of tighter restrictions on mobility, including provincial/state lockdowns and border closures to contain the latest Covid-19 surges, sap rebound momentum and weaken already-fragile recoveries. 70 2 28
=7 Latin America Protests by port workers and others in export-oriented sectors including commodities exacerbate global supply chain disruption, contributing to shortages and rising input prices. 60 2 24
=7 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
=7 Pan-regional Growing public agitation in both advanced and emerging economies, against negative environmental and social impacts of large-scale projects, delay implementation and lead to deferred investments - particularly in the extractive sector. 60 2 24
=7 Pan-regional A rise in both insolvencies and non-performing loans over the next 12 months impact adversely on the global banking sector, leading to a credit squeeze for businesses. 40 3 24