The Zurich SME Risk Index, which measures the perceived level of business risk faced by British small and medium businesses, has risen for the first time in 12 months.
The rise from 41.68 in the fourth quarter of 2013 to 43.19 in first quarter of 2014 indicates businesses are seeing more risk than at any time since the first quarter of 2013.
Increasing concerns about cyber threats are a major factor in this rise. 45% of the decision makers surveyed from SMEs are now concerned about technological vulnerabilities in their business (e.g. cyber security, data integrity, and mobile devices), a 12% increase since January 2013.
More than one-in-three (37%) SME respondents now class the threat of cyber-attack as one of the three biggest technology risks to their business, the highest level of concern shown for this threat since the Risk Index was created.
The survey by the global insurer also reveals that data loss and privacy breaches are the number one technology concern facing SMEs, with 36% of respondents choosing this option, when asked to pick their top three.
Data loss has now overtaken the failure of local network systems (32%), which posed the greatest problem last quarter (35% to 36% respectively in January 2014).
Zurich’s separate Risk Nexus report on cyber risk offers an insight into why concerns about cyber threats are so high, revealing that 2013 was the worst year for data breaches so far, with 740 million data files viewed or stolen worldwide.
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Risk Index respondents also expressed concern about regulation and workforce challenges. Half of SMEs are now concerned about business regulation and compliance, and 44% of SMEs are concerned about workforce challenges, such as availability of expertise and workforce capacity – relative to 33% over a year ago.
Key person dependency remains the biggest workforce risk, as identified by 40% of SMEs when asked to pick their top three, a 13% increase on last quarter.
However, new innovations, including tech developments, are also increasingly seen as an opportunity. Almost a quarter (24%) of SMEs view web-trading and online marketing as one of the three biggest opportunities for their business at present, with over a fifth (21%) seeing new areas of business innovation (e.g. teleworking and mobile technology) in the same way.
“With concern about risk rising amongst SMEs for the first time in 12 months in the wake of a number of high profile security threats, worries about tech vulnerabilities are increasingly an issue for business owners," said Richard Coleman, director of SME at Zurich Insurance. "Not only could a hack result in a loss of sensitive data and reputational damage with a business’ customer base, but there is also the possibility of missing out on valuable opportunities for business growth via web trading or taking advantage of mobile technology for payments or remote working.
“Ultimately this increase in risk is being driven by positive developments in the UK economy, with growth delivering greater demand for workforce talent and the chance to take advantage of tech developments. This is a great example of an area where business owners should be making sure their risk management follows these exciting new innovation possibilities, to ensure they reap the full potential of the opportunities.”