Lack of foresight is putting UK small business at risk
UK SMEs are leaving themselves open to major business risks and despite almost one-in-two businesses (46%) rocked by unforeseen events or risks in the last six months, less than one-in-two businesses reacted positively to the risk by putting a remedial plan in place. The new research from Aon Risk Solutions, the global risk management business of Aon plc (NYSE: AON), also reveals that at a time of heightened internet security, only one in four (27%) businesses put a remedial plan in place to protect their business from cybercrime.
At a time when British SMEs are showing signs of increasing confidence and a good degree of optimism towards future business growth, the Aon research suggests that this optimism may be short lived. A failure to understand the impact and potential challenges to their business and tackle them head on can potentially have a catastrophic impact on a company’s bottom line in the long-term.
In a nationwide poll of 766 decision makers from SME businesses, Aon explored what unforeseen incidents resulted in a remedial plan and revealed a regional ‘heat map’ of businesses most likely to have experienced unforeseen risks.
Too little, too late
· With workplace accidents on the increase, costing UK SMEs in excess of £8.6bn a year1, 77% of UK SMEs didn’t have a plan already in place to anticipate the risk of an injury at work and only put a remedial plan in place after the incident
· At a time when all businesses should be looking at the most efficient business model for the future success of their business, alarmingly, almost three in four businesses (74%) only put a plan in place during or after a major business restructure – leaving the business open to chaos, and having a potentially negative impact on business growth
· With the rise of an increasing litigious society and the growth arrival of the ‘no win, no fee’ companies, all businesses are at risk. However, sparingly perhaps, 70% of businesses only put a remedial plan in place after legal proceedings began, exposing the business to reputational damage, one of the top concerns for risk managers in the UK today
· According to Aon’s Global Risk Management Survey 2015*, cyber risk made it into the top ten for the first time as the ninth biggest risk to corporates. With cybercrime on the increase, and some companies going to significant lengths to increase their surveillance levels and strengthen their cyber defences, the research found that this is an issue that the majority of UK businesses are slow to tackle. Just over one in two businesses (57%) already had a remedial plan already in place to tackle cyber attacks, an oversight that could impact the very core of its business.
· Furthermore, the ripple effect of cybercrime will also need to be ‘risk managed’, although the research suggests that issues such as mitigating reputational risks (39%), loss of a major contract (48%) and attracting new backers (60%) are relatively low as a priority. To effectively assess and mitigate a company’s risk exposure, it is vital that the board has effective and regular communication with risk managers so that they are totally aligned.
The risk hot spots
The research also looks at who was most likely to have experienced unforeseen risks and the results highlighted huge differences between business size, sectors and by region.
· Medium sized businesses, on average, experienced more risks than small businesses (57% vs. 43%), and they experience different risks in their business cycle. Small businesses are more at risk following the loss of a major business contract (12%), whereas a medium sized business is more likely to be at risk of an unforeseen business restructure (12%)
· By sector, possibly because of the economic volatility and the rise and fall of consumer demand, manufacturing is exposed more than any other sector to potentially unforeseen risks (59%), followed by the media (52%) and the IT and telecoms sector (48%). Those less at risk include, retail (38%), construction (44%) and finance and accounting (46%)
· Where your business is based in the UK would also appear to affect your ‘at risk’ rating, with businesses based in Scotland (55%), marginally ahead of businesses based in the capital, London (54%). Businesses based in the east of the UK were least at ‘risk’ according to the research.
Chris Lee-Smith, managing director, Aon Affinity, commented: “As British SMEs are emerging confident from a prolonged period of stagnated growth, now is the time that SMEs should pause and evaluate whether they have the effective strategy in place to anticipate all the potential ‘risks’ to the business. Without this, the business is wide open to risk which will not only have a negative impact in the short-term but may have a devastating effect on the longer term growth ambitions.”