Global Matrix Report Q1 2016

In The Dun & Bradstreet overall Global Business Impact (GBI) score for Q1 2016 is the second lowest on record since we started the Global Risk Matrix (GRM). It confirms our view that despite the gloomy headlines business conditions are gradually easing almost a decade after the start of the global financial crisis. The GBI improved for a second successive quarter, albeit only marginally to 230 (out of a maximum of 1,000) from 231 in the previous quarter. Our lowest GBI score, 226, was recorded in Q1 2014.

Our top ten risks combine an assessment of (i) the event’s probable magnitude on the global business operating environment and (ii) the likelihood of it happening. Previously the GRM was based around risks emanating from the seven regions Dun & Bradstreet covers, but we have now enhanced our matrix by adding risks that are pan-regional.

Six New Risks

Despite the relative stability of the score over the past two quarters, the Q1 2016 GRM has six new entries, highlighting that, in an increasingly complex and globalised world, finance, procurement and supply chain teams across all sectors of business face urgent and ever-evolving risks. The six new entries relate to:

  1. Bad energy loans in the US creating systemic risk in the financial sector (GBI of 32 out of a maximum 100);
  2. A large influx of refugees into Europe undermining supply chains (GBI of 30);
  3. Low oil prices fomenting socio-political unrest in oil-rich countries (24);
  4. The fall in banks’ share prices triggering serial defaults and global recession (20);
  5. Capital flight forcing the Chinese yuan below CNY7:USD and causing market volatility across Asia (20); and
  6. Resistance to austerity measures leading to further debate on a Grexit in the medium term (18).

Of the four risks that remained in the GRM from Q4 2015, the GBI of one worsened, two improved and one remained the same.

The likelihood of Chinese real GDP growth slowing to below 5% has increased from 35% to 50%, raising its GBI score from 28 to 40. Meanwhile, the likelihood of the ECB’s quantitative easing programme adding further volatility to global markets has fallen from 75% to 60%, lowering its GBI from 30 to 24.

Although we forecast that the likelihood of the strong US dollar impacting negatively on US businesses has increased from 35% to 50%, we have lowered its global impact magnitude from 3 (out of a maximum 5) to 2, thereby reducing its GBI from 21 to 20. Finally, the GBI associated with civil wars in Iraq, Syria, Yemen and Libya spreading into neighbouring countries and giving radical Islamist groups further opportunities to launch economic jihad remains at 20.

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