Brexit is not perceived as a future risk by the majority of businesses, according to research from the RSA. Nearly three quarters 70 per cent state that leaving the EU will either have no impact at all (43 per cent) or will have a positive effect on their business (27 per cent). However, SMEs identify a range of more significant threats which many companies are not sufficiently protected against.
The research shows that an alarming number of SMEs have no measures in place to fall back on if they were to be affected by one of the top risks they identified as a potential threat to their business, with 28 per cent of SMEs in the UK stating that they would go out of business if faced with an unexpected bill of £50,000.
Other major future risks businesses cite include economic uncertainty (35 per cent), increasing market competition (35 per cent) and cash flow (31 per cent).
While 58 per cent of businesses are not insured against these three risks, the scale of underinsurance is further highlighted by the fact that almost nine in 10 (88 per cent) brokers see underinsurance as a problem for their SME clients.
Although not all risks are directly insurable, there are policies that businesses can take out that would alleviate the impact these risks could have, such as, for example, business continuity insurance which could cover loss of income in the event of a significant incident affecting their property.
RSA’s Future Impacts report also investigates the emerging risks for UK businesses, with 73 per cent of SMEs stating that new risks have emerged since they first started their company. However, 82 per cent have not altered or increased their insurance coverage as a result of technological change.
The threat of cyber-attacks, for example, is one of the most prominent emerging risks for businesses. However, while government figures show that two-thirds of large businesses and three-quarters of SMEs had experienced some form of cyber-attack, RSA’s research shows that only 9 per cent of businesses have cyber cover in place, and only 26 per cent are concerned about the threat posed by a cyber-attack.
Businesses’ lack of protection against cyber breaches is echoed by government data, which found approximately one third of firms had formal written cyber security policies and only 10 per cent had an incident management plan in place.
Russell White, schemes and deals director at RSA, thinks that taking on an element of risk is a necessary part of driving growth for any small business, but it is crucial that these risks are managed effectively in order for the company to thrive.
White says, ‘Our research shows that there is a significant disparity between the issues perceived by UK businesses to be a future risk and the extent to which they are protecting themselves against them. Many are putting themselves in a precarious position by not having anything to fall back on if they are hit with unexpected costs.’
He concludes, ‘It is crucial that businesses frequently review their risk management strategies and ensure that their insurance policies are up-to-date so that they can be confident that their insurance will pay out should they need it.
‘A great way to ensure that your cover is up-to-date is to see a broker who can provide free and impartial advice on whether your business is sufficiently protected and if not, how you can correct this.’