Small business leaders are focused on the ‘world’ rather than risks closer to home
UK Small Business leaders are more concerned with the impact of market (61%) and political risks (63%) on their business than managing the potential internal risks their business faces on a daily basis (44%) – according to new research from Aon Risk Solutions, the global risk management business of Aon plc (NYSE: AON).
With 84% of businesses acknowledging that they face a plethora of potential risks in the next 12 months, a period of heightened security and global market uncertainty has perhaps forced businesses to focus on the world stage and place a stronger focus on external rather than internal risks to their business and reputation.
In a nationwide poll of 766 decision makers from SME businesses spanning a range of industry sectors, Aon explored the most significant risks that business leaders say they will tackle in the next 12 months. The results highlighted the need for many leaders to rebalance the focus on the immediate risks to their business ventures so that they can put remedial plans in place to mitigate the immediate risks on their doorstep.
The top risks
– The risk of falling demand for products and services was a top concern for 34% of the UK businesses polled. The uncertainty that can come with a general election, together with uncertainty over the economic recovery in mainland Europe perhaps combined to fuel caution among business leaders on what customer demand might look like tomorrow.
– As businesses struggle to manage the operational costs associated with running a business, the potential escalation of the day-to-day cost of running a business was a perceived risk for more than one in four businesses (28%).
– During the run up to the general election when all the major parties addressed the need to support small business start ups, 27% of businesses polled by Aon said that the increasing pressures placed on the businesses by red tape and regulation was a serious risk to the business.
– How a business anticipates and manages the cash in and out of a business and the risk of insufficient cash reserves was raised as a serious challenge and risk to the financial stability of companies over the next 12 months.
– Following the recent events in Greece and the constant threat of political instability, 22% of small businesses also said that political uncertainty will be a very real risk to their business in the next 12 months.
– As businesses anticipate the potential risks open to their business in the next 12 months, insurance risks came bottom of the risk list. With all businesses exposed to the damaging impact that litigation could have on their businesses, it is surprising that this was a concern for only 4% of business owners, and the risk of accidents in the workplace stood at a mere 3%.
Accounting, finance & legal
– 64% of those surveyed in the accounting, finance & legal sectors said that political issues were one of the biggest risks for their business.
Manufacturing & Construction
– 70% of those in the manufacturing industry claimed that market issues, such as falling demand for products and services, rising operational costs and breakdown of supply chain, were the most significant risks for their business.
– Surprisingly, accidents in the workplace featured low on the priority list for those in the manufacturing sector, with only 5% of businesses claiming that they saw these as one of the top three risks their business faced. Even more surprisingly, only 11% of those surveyed in the construction industry said that accidents in the workplace were one of their most significant risks.
IT & Communications
– Cyber attacks and data loss are becoming increasingly sophisticated and dangerous and, with this in mind, should be high on the agenda of all businesses. This is not the case it would seem – particularly with those in the IT & Communications sector – only 19% rated cyber risk as one of the top three risks for their business.
Chris Lee-Smith, MD, Aon Affinity, said: “It is in the interest of every UK business to identify and anticipate all the potential risks open to the business. With the recent disruption caused by the recent general election, it is significant that almost one in four UK businesses have identified political uncertainty as a very real risk to overcome in the next 12 months. However, what the research has highlighted is the gaping hole that currently exists between the big picture and local and immediate risks. Many businesses are worried about things they cannot control and the experience of local or immediate issues which they can. As the leading insurance broker for the business sector, we can help businesses of all sizes anticipate and manage the risk they can control, enabling businesses to anticipate risks and manage change – and freeing them up to do what they do best.”