Crisis incidents, such as cyber-attacks, extortion, industrial espionage and terrorism, are costing UK SMEs billions of pounds a year. Furthermore, subsequent trading paralysis is putting thousands at risk of collapse in their aftermath.
UK SMEs paid out an average £6,416.50 last year to deal with crisis incidents, according to research by Gallagher, one of the world’s largest insurance broking, risk management and consulting services companies. This equates to a combined business cost of £8.8bn in 2018 alone.
In a poll of 1,120 UK SMEs, nearly a quarter (24%) confirmed they were affected by a crisis event last year, equating to 1.4 million across the country – a 5% increase from 2017. One in six (17%) SMEs affected by a crisis spent £10,000 or more to combat crises, with nearly one in 10 (9%) paying out in excess of £20,000.
A quarter of SMEs (23%) said they would survive for less than a month if rendered unable to trade by a crisis incident. Based on these findings, we estimate that nearly 57,000 UK SMEs could be at risk of collapse this year if unable in the aftermath of a crisis event.
Paul Bassett, Managing Director of Crisis Management at Gallagher, said: “Our research illustrates the scale of the challenge facing UK SMEs. When it comes to crises, cyber and IT security clearly represent a “soft underbelly” of businesses that together account for more than 99% of private sector firms. Given that the UK economy is heavily tilted towards services, cyber-attacks and data breaches evidently present a growing and grave threat to small and medium-sized businesses.
“Alongside regularly reviewing their crisis preparedness, response plans and forms of protection, such as insurance, it is critical UK SMEs also assess their ability to survive in the event of a major crisis incident when the risk of serious disruption and protracted recovery process is very real.
“The cost of a crisis is by no means the only consideration. Duration is key, especially with a quarter (23%) of UK SMEs admitting they could survive for less than a month if unable to trade following an incident. For companies with tight margins and limited working capital, even a relatively short-term denial of access to premises or systems paralysis could be a crippling, possibly fatal, blow.
“We urge all businesses to ensure they have the crisis cover and plans in place to strengthen their ability to anticipate, prevent, respond and recover from a major security incident, but also have access to emergency funds, 24/7 crisis response consultants, post-incident counselling and business recovery advice, in order to stay solvent and help them and their people recover quickly.”