How risks to small-to-medium businesses changed in 2023

At the beginning of 2023, business interruption presented a major threat. In the Allianz Risk Barometer, it ranked as the most significant threat to medium sized businesses and the third most significant to small businesses. No wonder, because this threat can flow from a wide range of causes – from COVID-related or war-related supply chain disruption to rising fuel costs, extreme weather and cyber-attack.

At 2023’s conclusion, this risk had not abated. These factors remain significant, with additional geopolitical conflicts adding complexity.

In the Allianz Risk Barometer, the risk of cyber incidents–such as IT outages, ransomware attacks or data breaches–ranked the top risk for small businesses overall, and the second for medium businesses.

Some of this was due to the steadily increasing numbers of cybercrimes reported (up 13% in the 2021-22FY), and some due to the soaring cost of each data breach (expected to surpass US$5 million in 2023).

As the year evolved, so did the risk. The Allianz Risk Barometer highlights that smaller companies lack the financial and employee resources of large corporations with IT security often outsourced. Many continue to be under the misconception that cyberattacks won’t happen to them, but as the larger businesses ramp up their investments in cyber security tools, the smaller companies with less protection are being targeted.  

The take-out for SMEs? Consider the option of a cyber insurance product such as Coalition, which is designed to prevent digital risk before it strikes.

Back in January 2023, natural catastrophe was ranked the number one risk in Australia overall by risk management experts, including CEOs, risk managers, brokers and insurance professionals, in the Allianz Risk Barometer. This included events like storm, flood, earthquake, bushfire and other extreme weather.

But how are SMEs affected, specifically? Small to medium sized businesses will typically have fewer financial resources and less resilience. 

This means catastrophic and extreme weather events, if not sufficiently insured against, can present a significant threat to a business. “Staying informed about the risks is very important,” Sally points out.

In January 2023, macroeconomic factors including inflation or economic and financial market volatility ranked as the second most concerning risk for small businesses, and a close fourth for medium ones.

Throughout 2023, these factors had many SME owners caught between a rock and a hard place. “41% of SME owners say they don’t see insurance as a priority – perhaps because they’re under pressure to save money with interest rate increases and drops in consumer confidence,” says Sally. “But adequate insurance coverage is essential to reduce uncertainty in challenging times.”

No matter how things might change throughout 2024, it’s universally true that knowledge is power, and good advice can be priceless.

“For a SME, the easiest way to ensure you’re on top of changes and risk management is to talk to an expert and review your insurance,” says Sally. “Risks can be mitigated and controlled – but they need adequate risk management.”

That’s why no matter what your business goals are for 2024, it’s smart to take stock of where you stand in terms of risk.