UK SMEs face array of diverse risks according to Marsh poll

Some 39% of UK SMEs named energy costs as their top emerging risk during the next 12 months, followed by 32% citing inflation and 27% staff shortages, according to a poll of more than 1,700 businesses by Marsh. Publishing its second UK Business Risk Report, Marsh said UK SMEs’ emerging risk list is driven by wider concerns about the economic climate. Cybersecurity was named as a concern for 23% of businesses, up from 17% last year, and supply chain disruption polled at 18%. “This represents a worsening of business sentiment around emerging risks – reflecting subsequent rises in rates of inflation and energy prices,” Marsh states in its report. “Business owners should also be mindful about recovering from a major business event. Labour shortages, supply chain disruption, contractor solvency and many more inflationary-related issues will add to the time a business takes to recover from a major loss.” The study also surveyed businesses on people risks, internal risks and property risks. It found employee mental health and wellbeing is the leading people risk and single biggest concern for UK SMEs across all categories, named by 49% of respondents and up from 30% in 2021. Health and safety polled as the second greatest people risk at 33%, and talent management was named by 19% of respondents, in third place. “Businesses’ growing concern about employee mental health and wellbeing are well founded. Illness related to mental health remains the most common cause of long-term staff absence and, together with stress, mental health issues account for 59% of short-term absences,” the report says, adding that the cost-of-living crisis could exacerbate this trend. Some 36% of respondents named financial uncertainty as their leading internal risk, although Marsh says this is down 6% from last year. Some 27% said future ways of working are an internal risk for their business, following legal and contractual changes to facilitate remote and hybrid working. Related risks such as diversification and innovation, and improving business processes, both polled at 13%. Asked about property risks, 30% of UK SMEs surveyed named security risks as their top concern, followed by the impact of extreme weather. The rising cost of building materials and underinsurance were named by 18% and 9% of UK SMEs, respectively. Marsh says this is a growing risk. “The rebuild valuations on which property insurance sums insured are based are under significant pressure, with many falling short,” it says. Alistair Fraser, CEO of corporate and commercial UK at Marsh, says in the report that SMEs in every region and every sector are facing an array of hugely diverse risks. “Since the survey was conducted, UK inflation has reached a 40-year high, which will have a profound impact on how these firms operate in the near and longer term. As new risks emerge and current risks continue to evolve, we urge businesses to review their current insurance arrangements and approach to risk management, to build even greater resilience into their people and operations,” Fraser says. The report also finds a “continued lack of awareness” among UK SMEs about the scale of the net-zero challenge, with 56% claiming to have no concerns about achieving net zero. Some 62% said they are not concerned about complying with requirements set by the Task Force on Climate-related Disclosure, while 55% do not see the need to adapt to carbon accounting standards as a significant business risk. “While a focus on immediate risks, away from climate-related risks, is understandable in the current economic climate, it must be remembered that these risks will not simply go away,” the report notes. “Addressing climate- and carbon-related risks is now urgent… Despite there currently being no requirement for smaller businesses to follow climate reporting rules, if they are part of a larger business’s supply chain, their activities will be scrutinised too and reported on by the larger business,” Marsh says. It adds that smaller UK businesses are also likely to soon come under climate disclosure rules already in place for larger businesses.

UK SMEs face array of diverse risks according to Marsh poll

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