Reputational risk fastest rising for APAC’s SMEs: Zurich

Nearly one third of SMEs said the impact of competition on margins and lack of consumer demand continue to top their list of concerns.

These were certainly key concerns for businesses in Hong Kong and Australia that represented the Asia-Pacific region. Cyber is also a fast-rising worry for SMEs in the region as they wake up to the threat.

The good news is that Zurich’s survey found that risk awareness has improved, with more than 90% of SMEs surveyed now aware of the risks that threaten their business. Concern about the risk of cybercrime almost tripled between 2013 and 2016. At the same time, fears about reputational damage more than doubled, reports Zurich.

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The survey was based on a poll of 2,600 c-suite executives and managers at SMEs across 13 countries in Europe, the Americas and Asia-Pacific.

The company states that concerns among respondents about cybercrime have almost tripled since 2013 (11% against 4%). Worries about reputational damage have also increased (14% against 8% three years ago). These were the fastest-growing perceived risks since the survey began in 2013.

Just under a third (31%) of businesses that took part rated the impact of competition on margins as the greatest risk that faces their business. This represented a slight fall from previous years.

Lack of consumer demand continued to be the second-greatest risk, and has increased in prominence since 2013 (30% against 24%). “Globally, SMEs’ risk awareness increased over the past years – only 7% don’t see any risks for their business in 2016,” said Zurich as it published the report earlier this month.

The survey found that global economic recovery and growth have led SMEs to be more optimistic about expansion.

In 2016, just 8% saw no opportunities for growth, down from 16% in 2013.

“Despite this, SMEs are more focused on their home markets, reducing foreign expansion ambitions (10% vs 14% in 2013). As in previous years, SMEs have continued to reduce their costs and expenses to fund growth (33% vs 26%),” explains Zurich.

Companies in the Asia-Pacific region are more optimistic about growth than others, found the survey.

“SME’s expectations regarding growth are encouraging; SMEs in this region are far more optimistic about growth than in the past – in 2016, only 13% saw no opportunity to grow, versus 29% in 2013. Confidence has increased; many SMEs are diversifying their offerings (29%), new business technologies (16%) and acquisition of competitors (14%) are viewed as increasingly viable growth opportunities,” reports Zurich.

The main risks identified by Asia-Pacific participants in the survey are not surprising, but reputational risk is fast rising up the agenda.

“SMEs in Asia-Pacific are worried about fire, cybercrime, technological vulnerabilities, health and safety of customers or employees, and corruption, which have almost doubled. However, the fastest-growing concern is the threat of reputational damage, which rose to 12% from 2%,” reports Zurich.

The company said, however, that for Asia-Pacific SMEs lack of consumer demand and overstocking is the most critical risk and has increased significantly over time.

Risk perception is spread out across more items in Australia than in Hong Kong, found the survey. The major concern in Hong Kong is high competition, while Australian SMEs are more worried about lack of demand. Customer or employee health is a “pressing concern” for Australian companies with revenue of more than A$2m.