The threat of network failures, cyber attacks and data loss is overshadowing growing business confidence by the UK’s small and medium enterprises (SMEs), a survey has revealed.
Nearly half of SMEs believe the economy will improve in the next quarter, up from 40% the previous quarter, according to the latest SME Risk Index from Zurich Insurance.
The perceived level of risk is at its lowest level in 18 months, but longer term risks of technological vulnerability, severe weather and workforce challenges remain a threat, respondents said.
While 27% said online marketing and web trading were among the top opportunities for their business, 39% are worried about vulnerabilities associated with the use of technology.
Almost two-fifths cite the failure of local network systems as one of the three biggest technological risks to their business, followed by cyber attacks (31%) and the threat to their social media reputation (15%).
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Workforce challenges, such as the availability of expertise and talent, also appear to be keeping SME decision-makers awake at night, with 36% saying they are concerned about this.
Demographic challenges, such as the ageing workforce, are highlighted as one of the three biggest workforce risks by 10%, up from 6% in January 2013.
Along with technological and workforce challenges creating long-term risks to businesses, more traditional risks posed by major incidents such as severe weather can also cause serious disruption.
However, the latest survey reveals that 78% of respondents said they are not overly or at all concerned by the prospect of a major incident like flooding or fire.
Despite recent storms and flooding, only 18% of SMEs cited unpredictable weather as one of the three unforeseen threats they are most concerned about.
“It’s very encouraging to see that 41% of SMEs experienced growth in the last quarter, and that the vast majority have avoided emergency measures to cut costs and improve business performance,” said Richard Coleman, director of SME at Zurich Insurance.
“As we saw in Q3’s SME Risk Index survey, growth presents new, exciting opportunities for small businesses, particularly in areas like recruitment and web trading. While it’s important for business owners to avail of these opportunities, it’s also important that they plan sufficiently ahead for the long-term risks on the horizon, such as the significant changes underway in technology and workforce structure,” he said.
Coleman said traditional risks like severe weather should also not be overlooked.
“Only 3% of SMEs report that flood prevention measures are one of their three most serious operational risks, but with flooding in recent months causing disruption to many businesses, it’s likely that many SME owners need to consider moving major incident risk management closer to the top of their priority list,” he said.
Coleman said while these are insurable incidents, a focus on prevention, preparedness and mitigation is invaluable in the event of an incident to ensuring a speedy return to business.