Global Business Risk Report Q4 2020

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 slightly to 320 in Q4 2020 from the record-high of 332 in Q3, indicating nevertheless that the outlook for cross-border businesses remains extremely challenging.

Risks are lower, but remain extreme

In Q4 2020, Dun & Bradstreet’s GBI score eased slightly to 320, down from the record high of 332 recorded in Q2 and Q3. Nevertheless, the score remains at an extreme level, especially when compared with its record low of 219 in Q1 2018. The latest score indicates the high level of uncertainty facing businesses that operate cross-border. The Q4 score is also well above the long-term average of 265.2, while the average for 2020 (325.5) is the highest recorded for any year since the GBRR was launched in 2013.

Six new risks in the global top ten

Our top ten risks are based on the expertise of Dun & Bradstreet’s team of regional economists and combine 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.

Highlighting the evolving impact of the COVID-19 outbreak on economic, political and social conditions, and thus the ever-changing global business environment, each of the six new entries in our Q4 2020 report are directly related to the pandemic.

The six new-entry risks are:

  1. Subsequent rounds of fiscal support approved by the US Congress for households and businesses fall short, contributing to higher SME bankruptcies and a severe slowdown in the jobs recovery, significantly weakening the economic rebound in 2021 (GBI of 39, out of a maximum 100);
  2. Lockdowns in South and Southeast Asia fail to contain the disease by 2021, resulting in a structural depression in trade and investment for low- and low/medium-income countries and harming their global interconnectedness (GBI of 30);
  3. Lockdown measures in West and Central Europe have to remain in place until Q2 2021, prolonging the damage caused by the pandemic (GBI of 28);
  4. Failure by advanced countries’ populations to take up vaccines in sufficient numbers means that COVID-19 remains an issue well into 2022, curtailing any rebound in business activity (GBI of 28);
  5. North American travel restrictions contribute to a severe economic contraction among Latin American and Caribbean economies that rely heavily on US and Canadian tourism for government revenue and foreign exchange (GBI of 24); and
  6. 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 (GBI of 24).

Among the four pre-existing risks in our top ten, the GBI scores have remained the same as in the previous report.

The overall top ten for Q4 highlights the extreme nature of the risks related to the COVID-19 pandemic – all ten risks are associated with it. In terms of geographies, five are pan-regional, three stem from North America, and there is one each from West and Central Europe and Asia Pacific.

The impacts of the COVID-19 pandemic are also spread across different types of risks: markets (2), lockdown policies (4), other policies (2) and societal pressures (2). The widespread impacts 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.

 

Market concerns

Two of our top ten risks relate to how the COVID-19 pandemic will continue to undermine markets, lowering confidence and raising risk premia, and thus reducing prospects for doing business well into the medium term. 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.

The latest GBI score highlights that the COVID-19 pandemic is keeping the business operating environment close to its most challenging level since the index began.
 

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.

 

The impact of lockdowns

The impact of lockdown policies (present and potential) to contain the spread of COVID-19 feature in the top ten risks for businesses operating in the global environment. The first such risk is in equal second place overall, with a GBI of 39 (the same as in the previous report): this risk, emanating from North America, is that the exponential rise in COVID-19 infections in the US forces lockdowns to be extended into Q1 2021, severely sapping global demand for goods and services, weakening the recovery and prolonging the global recession.

In equal fourth place overall, and emanating from Asia-Pacific, is our concern that lockdowns in South and Southeast Asia fail to contain the disease by 2021, resulting in a structural depression in trade and investment for low- and low/medium-income countries and harming their global interconnectedness. The GBI of this new risk is 30.

The third lockdown-related risk, in equal seventh place with a GBI of 28, is another new entry and emanates from West and Central Europe. We are worried that the lockdown measures in the region will have to remain in place until Q2 2021, thereby prolonging the damage caused by the pandemic.

The final lockdown risk is in equal ninth place, with a GBI of 24 – it stems from North America and is another new entry: we are concerned that North American travel restrictions contribute to a severe economic contraction among Latin American and Caribbean economies that rely heavily on US and Canadian tourism for government revenue and foreign exchange.

Potential for policy failure

Two risks in the Q4 2020 top ten are related to the potential for policy failures related to COVID-19 to further raise the risks of doing cross-border business. The first of these risks is that subsequent rounds of fiscal support approved by the US Congress for households and businesses fall short, contributing to higher SME bankruptcies and a severe slowdown in the jobs recovery, significantly weakening the economic recovery in 2021. This new entry from North America is in equal second place overall, with a GBI of 39.

The second risk associated with potential policy failure is also a new entry, at equal ninth with a GBI of 24, and is pan-regional in nature. This risk is that 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.

Societal issues also increase risk

The final two risks in the latest top ten are related to societal issues increasing the risks for doing cross-border business. The first of these risks is that 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. This pan-regional risk is in equal fourth place, with a GBI of 30, the same as in the previous report.

The final risk is pan-regional in nature and is a new entry in equal seventh place. We are concerned that failure by advanced countries’ populations to take up the approved vaccines in sufficient numbers means that COVID-19 remains an issue well into 2022, curtailing any rebound in business activity.

Summary: Business environment risk eases but remains extreme

The Dun & Bradstreet Global Business Impact score for Q4 2020 indicates that the risks confronting businesses remain extreme.
 

Dun & Bradstreet’s Global Business Impact score for Q4 2020 shows that the risks confronting businesses remain extreme, albeit just below the record highs experienced in Q2 and Q3. The elevated level of risk is being driven by the outbreak of COVID-19 and by attempts to control its spread while mitigating the impact on business activity, sovereign finances and societal tensions: the outbreak illustrates how unexpected events can suddenly worsen the risk environment for businesses operating cross-border.

 

The Q4 2020 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 underlines the importance of a 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, fueling solutions and delivering insights that help customers to accelerate revenue, lower cost, mitigate risk, and transform their businesses. The impact of the pandemic is 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, survive and thrive during these times is to leverage data to turn risks into opportunity. We highly recommend that business leaders:

  • Strike the right balance between risks and opportunities in business relationships is crucial to growing profitability.
  • Monitor country, sector and counter-party risks will help businesses to incorporate macro and micro analyses and forecasts into short, medium and long-term planning. This also helps to limit and payment delinquency risks, guide cash flow management decisions based on anticipated changes in credit risks and facilitate changes to strengthen the integrity of the supply chains.
  • Recognize that a global view enables mitigation of emerging cross-border risks, and the ability to grasp growth opportunities wherever they are in a timely way.
  • Understand that business agility can be the biggest asset for commercial viability, especially during unprecedented times.
  • Appreciate that 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 as businesses face constantly changing interventions and regulations.

And remember that businesses do not have to do it alone. Dun & Bradstreet’s insights can help businesses navigate short-term crises and support their long-term growth efforts. Please contact your Dun & Bradstreet Account Manager today to learn how to manage your risk profile properly and plan for sustainable success.

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 North America An exponential rise in Covid-19 infections in the US forces the extension of lockdowns into Q1 2021, severely sapping global demand for goods and services, weakening the recovery and prolonging the global recession. 65 3 39
=2 North America Subsequent rounds of fiscal support approved by Congress for households and businesses fall short, contributing to higher SME bankruptcies and a severe slowdown in the jobs recovery, significantly weakening the economic rebound in 2021. 65 3 39
=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
=4 Asia-Pacific Lockdowns in South and Southeast Asia fail to contain the disease by 2021, resulting in a structural depression in trade and investment for low- and low/medium-income countries and harming their global interconnectedness. 50 3 30
=7 West & Central Europe Lockdown measures in West and Central Europe have to remain in place until Q2 2021, thereby prolonging the damage caused by the pandemic. 35 4 28
=7 Pan-regional Failure by the population in advanced countries to take up the approved vaccines in sufficient numbers means that Covid-19 remains an issue well into 2022, curtailing any rebound in business activity. 35 4 28
=9 North America North American travel restrictions contribute to severe economic contraction among Latin America and Caribbean economies that rely heavily on US and Canadian tourism for government revenue and foreign exchange. 60 2 24
=9 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