Global Business Risk Report Q1 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 significantly to 269 in Q1 2021 from the near record-high of 320 in Q4 2020, indicating nevertheless that the outlook for doing cross-border business remains extremely challenging.

Global business risks ease, but remain elevated

In Q1 2021, Dun & Bradstreet’s GBI score eased significantly to 269, down from the near record-high of 320 recorded in Q4 2020. Despite the global pandemic, it is now at its lowest level since Q3 2018. Nevertheless, the score remains above the long-term average (265.3) and is well above the record low of 219 recorded in Q1 2018, thereby indicating the still-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 around 95% 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

Highlighting the rapidly-changing global business environment, we have four new risks in our top ten. Of the ten risks, three are due to political factors and the remaining seven are related to the Covid-19 pandemic. Furthermore, the impacts of the Covid-19 pandemic are spread across different types of risks: economic (3), policies (2), and societal pressures (2). The four new-entry risks, three of which are political and one is due to Covid-19, are:

  1. A rise in insolvencies and non-performing loans in 2021 as a result of the pandemic impacts adversely on the global banking sector, leading to a credit squeeze for businesses (GBI of 30, out of a maximum 100);
  2. The political crisis in Italy leads to early elections and the subsequent victory of the anti-EU far-right, thereby causing a fresh euro-zone crisis and impacting cross-border trade and investment with EU businesses (GBI of 27);
  3. As a key grain exporter, Argentina's bans and taxes on grains' exports fuel global food protectionism and drive up international food-price inflation, curtailing household spending power and raising threats of anti-government demonstrations (GBI of 24); and
  4. Recently strengthened ‘Buy American’ provisions reduce opportunities for foreign-based manufacturers to sell their products to US federal agencies, with ripple effects through global supply chains (GBI of 22).

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.
 

Among the six pre-existing risks in our top ten, five GBI scores have remained the same as in the previous report, while the score on the final risk has increased.

The overall top ten risks for Q1 2021 highlight the extreme nature of the issues related to the Covid-19 pandemic, with seven risks associated with it. The other three risks are related to political factors. In terms of geographies, six are pan-regional (including the top five risks), two stem from North America, and there is one each from West and Central Europe, 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.

 

Economic concerns

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 48 (the same as 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 third 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: Also, in equal third place with a GBI of 30 is the first new entry. In this case, the pan-regional risk 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.
  4. Societal issues increase risk

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

  5. Vaccines prove ineffective against mutations: The first of these risks relates to our concern that the failure by the population in advanced countries to take up the approved vaccines in sufficient numbers and/or mutations that arise to evade vaccine-mediated immunity mean that Covid-19 remains an issue well into 2022, curtailing any rebound in business activity. This pan-regional risk is in second place with a GBI of 32, up from 28 in the previous report, as experts predict the virus will mutate.
  6. Populism and anti-government protests: The second societal risk is also pan-regional, has a GBI of 30 (the same as in the previous report) and is in equal third 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 raises risks

    There are three political risks in our top ten, all of which are new entries.

  7. Italian political crisis: The first is that the political crisis in Italy leads to early elections and the subsequent victory of the far-right, thereby causing a fresh euro-zone crisis and impacting cross-border trade and investment with EU businesses. This risk has a GBI 27 and is in sixth place in the top ten.
  8. Food protectionism: The next political risk is in equal seventh place with a GBI of 24. On this occasion we are concerned that Argentina's bans and taxes on grains' exports fuel global food protectionism and drive up international food-price inflation, curtailing household spending power and raising threats of anti-government demonstrations.
  9. Buy American: The final political factor is that US President Joe Biden’s recently strengthened ‘Buy American’ provisions reduce opportunities for foreign-based manufacturers to sell their products to US federal agencies with ripple effects through global supply chains. This risk is in tenth place with a GBI of 22.
  10. Covid-19 policies

    The final two risks are associated with policies attempting to control the spread of Covid-19.

  11. Travel restrictions: In equal seventh place is the concern that prolonged travel restrictions by North American governments weaken the recovery in Latin American and Caribbean economies that are heavily reliant on US and Canadian tourists for revenue and foreign exchange. This risk has a GBI of 24, the same as in the previous report.
  12. Distribution failure: Also, in equal seventh place with a GBI of 24 (the same as in the previous report) is the final pan-regional Covid-19 risk. This is related to the potential policy failure of the 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 Dun & Bradstreet Global Business Impact score for Q1 2021 indicates that the risks confronting businesses have fallen but remain elevated.
 

What this means for businesses

Dun & Bradstreet’s Global Business Impact score for Q1 2021 shows that the risks confronting businesses remain elevated, 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 Q1 2021 GBRR.

 

The Q1 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 400 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, affecting emerging-market and advanced countries alike with its impacts on profits, employment and tax revenues, brings an unprecedented fiscal emergency that extends into 2022, damaging all grades of sovereign creditworthiness into the medium term. 60 4 48
2 Pan-regional Failure by the population in advanced countries to take up the approved vaccines in sufficient numbers and/or mutations that arise to evade vaccine-mediated immunity mean that Covid-19 remains an issue well into 2022, curtailing any rebound in business activity. 40 4 32
=3 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
=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 both insolvencies and non-performing loans in 2021 as a result of the pandemic impact adversely on the global banking sector, leading to a credit squeeze for businesses. 50 3 30
6 West & Central Europe The political crisis in Italy leads to early elections and the subsequent victory of the anti-EU far-right, thereby causing a fresh euro-zone crisis and impacting cross-border trade and investment with EU businesses. 45 3 27
=7 North America Prolonged travel restrictions by North American governments weaken the recovery in Latin American and Caribbean economies that are heavily reliant on US and Canadian tourists for revenue and foreign exchange. 60 2 24
=7 Latin America As a key grain exporter, Argentina's bans and taxes on grains' exports fuel global food protectionism and drive up international food-price inflation, curtailing household spending power and raising threats of anti-government demonstrations. 60 2 24
=7 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 2 24
10 North America Recently strengthened 'Buy American' provisions reduce opportunities for foreign-based manufacturers to sell their products to US federal agencies, with ripple effects through global supply chains. 55 2 22