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Location Risk Monitoring

Q3 2017, Supply Wisdom Monitor: Country Risk Index

Written by Swathi Sarma

Q3 2017 Supply Wisdom Monitor: Country Risk Index covers global outsourcing markets and ranks key locations based on the Composite Risk score, a comprehensive measure of important risk criteria. Ten major outsourcing markets have been analyzed in this index using the Supply WisdomTM framework, covering categories such as Geo-Political, Financial, Scalability, Legal, Business, Infrastructure, Macro-Economic, and Quality of Life.

Q3 2017 Highlights:

  1. China (#1) and India (#2) continue to be in the top two spots, owing to government initiatives for improving business environment in the country. China had announced several reforms to cut red tape and improve ease of doing business. India also jumped 30 spots to secure a place among the top- 100 countries on World Banks’ ease of doing business ranking list in 2018.
  2. Philippines climbed up by two positions during the quarter, moving from #7 to #5, primarily due to its strong economic growth and sustained political stability. However, the country faces stiff challenge in terms of by natural disasters, social unrest, increase in crime rates and terrorist attacks.
  3. Hungary ranks #7, declining 4 spots from the previous quarter, primarily due to drop in trade balance compared to last quarter. The country also witnessed a substantial increase in rental growth of Grade ‘A’ offices. High salary for professionals and limited availability of workforce are some of the other major challenges.1.

Click on any country for more information.

+ Moved up – Moved down
Rank Country Overall Risk Score
Q3 2017 Q2 2017
0 4.20 4.15

As per the Global Competitiveness Report 2017-2018, China has the highest ranking (27) among the BRICS group of large emerging markets. The Chinese government is focused on improving business environment in the country, mainly by introducing several reforms to cut red tape and improve ease of rules/regulations for multinational companies. However, risk from natural disasters continues to threaten the business operations that do not have appropriate business continuity plans in the country.

Geo-Political Risk witnessed a drop during the quarter owing to sustained political stability.
Financial Risk increased due to surge in rental growth of office properties compared to previous quarter.
Macro-Economic Risk saw an increase during the quarter due to high inflation rate and high fluctuation of Forex Rate
0 4.34 4.29

Amidst the significant upheaval in IT industry owing to automation, rising protectionism and US visa policy curbs, India is aggressively pursuing newer markets such as Australia, Sweden along with Mexico and Mauritius for IT exports in a bid to diversify its reliance on the US and Europe, and to increase the IT outsourcing market size. However, IT companies are grappling with stringent visa curbs/restrictions by several countries such as US, Australia and Singapore.

Macro-Economic Risk reported a drop during the quarter driven by increase in forex reserves.
Financial Risk reported an increase owing to increase in tax rates post implementation of Goods and Services Tax.
Geo- Political
Geo-Political Risk observed an increase driven by increased Social Security Risk owing to widespread violence in parts of North India during the quarter.
+1 4.78 4.73

A business friendly environment, attractive corporate tax rates, various incentives by government and easy access on other European market are some of the attributes which makes Ireland one of the most preferred destinations in Europe. The country has good English-speaking workforce, developing infrastructure along with political stability. Despite Brexit uncertainty, Ireland’s IT industry continues to grow. However, the country’s rating in ‘The Global Competitiveness Report 2017-2018’ has dropped by one place to 24th position out of 137 countries surveyed by the World Economic Forum.

Financial Risk increased significantly during the quarter owing to surge in rental growth of Grade ‘A’ offices.
 Geo-Political Risk witnessed a drop during the quarter, as no major natural disasters or epidemic were reported.
Infrastructure Risk moved upward as Ireland’s ranking in ‘Global Competitiveness Index 2017-2018’ has fallen by one place to 24 out of 137 countries.
+4 4.94 4.92

Poland reported a strong performance in GDP growth, reaching its highest level since the last quarter of 2011. Also, the fiscal & trade balance witnessed a considerable improvement from the previous quarter. Being a top player in the SSC/BPO sector in Central and Eastern Europe, the country is aided by good chunk of English speaking work force and is suitably ranked at 11th position in 2017 English Proficiency Index rankings, ahead of most Eastern European countries.

Financial Risk climbed up slightly during the quarter as a result of increase in fuel prices.
Legal Risk increased during the quarter due to poor standards of IP protection laws.
Infrastructure Risk witnessed a marginal increase from the previous quarter primarily due to unscheduled major power outages.
+2 4.96 4.99

Geo-Political and Business Risks continue to be the major challenges for Philippines. Increase in terrorist attacks and crimes prompted governments of US, UK, Canada and Australia to issue severe travel warnings. In terms of doing business, despite a number of incentives and reforms, high risk is driven by red tape, lengthy procedures to start enterprises and poor credit coverage. On the positive front, Philippines’ President declared liberation of Marawi from ISIS-affiliated militants.

Geo-Political Risk reported a decrease due to political stability and loosening grip of ISIS-affiliated militants in Southern Philippines.
Quality of Life
Quality of Life Risk increased due to adverse climate driven by heavy rainfall and flash floods.
Infrastructure risk decreased during the quarter driven by improvent in quality of electricity supply.
+3 4.97 5.02

Colombia’s BPO sector boasts of an ideal infrastructure for exporting sales, e-commerce, customer service, technical support and back-office services. However, the shortfall of bi-lingual and multi-lingual workforce persists to be a challenge in the sector. The country also faces other significant challenges such as persistent protest by people groups and increasing cybercrime. On a positive front, the Colombian government signed a bilateral cease-fire agreement with ‘ELN’ (the last remaining major rebel group) as a step towards establishing a permanent peace deal.

Geo- Political
Geo-Political Risk registered a drop as no major floods or protests were reported during the quarter.
Quality of Life
Quality of Life Risk reported a significant decline from the last quarter owing to an increase in lodging availability
Infrastructure Risk recorded a notable decrease during the quarter primarily owing to the reduction in power outages and the announcement of free trade zone in the country.
-4 4.97 4.99

Hungary is preferred location for investors who are looking for business expansion in Central and Eastern Europe region. Country’s outsourcing industry continues to expand as European and American firms prefer Hungary for nearshoring owing to its skilled talent pool and good multilingual proficiency. About 90% population speaks English. In ‘The Global Competitiveness Report 2017-2018’ by World Economic Forum, Hungary ranked at 60th place out 137 economies around the world. However, bureaucratic inefficiencies, high salary for professionals and limited availability of workforce are some of the major challenges faced by the firms operating in Hungary.

Infrastructure Risk dropped as the country performed well in ‘The Global Competitiveness Report 2017-2018’ by World Economic Forum with an improvement of 9 positions from previous year ranking.
Financial Risk increased during the quarter owing to surge in rental growth of Grade ‘A’ offices.
Geo-Political Risk reported decline as no major incidents of social unrest was reported during the quarter.
-2 4.98 5.02

Mexico is one of the prominent nations in the Latin American outsourcing industry with growing number of service providers and superior IT infrastructure. During the quarter, the credit rating agency ‘Fitch’ raised Mexico’s credit outlook from ‘Negative’ to ‘Stable’ citing lessened risks for economic growth and a stabilization of public debt. Geo-Political stability of the region remains one of the key concerns with social unrest in the form of protests and natural disasters such as earthquakes and floods.

Infrastructure Risk witnessed a decline from the previous quarter due to the improvement in terms of technological readiness.
Scalability Risk decreased during the quarter primarily driven by an increase in total BPO industry size.
 Geo-Political Risk witnessed a drop as no major natural disasters were reported during the quarter.
-4 5.01 5.02

Being one of the promising sourcing locations in the Asia Pacific, Vietnam is witnessing rising economic growth. During Q3 2017, GDP growth rate surged to 7.46%, highest since 2007, backed by solid expansion in services sector and exports. The country’s popularity as an attractive BPO destination is growing gradually driven by competitive operating costs. IT giants such as Microsoft and Intel continue to invest in Vietnam. However, shortage of skilled talent is a persistent issue. Also, the threat of cyber-attacks is high in the country.

Macro-Economic Risk reported decline during the quarter driven by trade surplus and increase in GDP growth rate.
Business Risk witnessed a minor decline driven by increase in the efficiency of government bureaucracy.
Geo-Political Risk remained Moderate. However, during the quarter there were reports of floods and typhoons that affected the country.
0 5.02 5.11

Brazil’s economy continued to show signs of improvement with its first expansion since the first quarter of 2014 due to a rebound in household spending. Foreign Direct Investment (FDI) also increased in the country when compared to the previous quarter. However, increasing budget deficit remains a major concern. Some of the other key challenges include social unrest in the form of violent protests and high crime rates.

Macro-Economic Risk decreased during the quarter driven by positive GDP growth and increased Foreign Direct Investments.
Business Risk moved upward owing to increase in documentation requirements for export and import.
 Geo-Political Risk witnessed a drop as no major natural disasters were reported during the quarter.

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