1. Cyber attacks
Cyber crimes cost UK companies an average of £4.1 million per year, according to the Business Continuity Institute's 2016 Horizon Scan report. Small wonder then, that 80-85 per cent of businesses consider cyber-related threats (e.g. hacking, data breaches, etc.) to be amongst their top concerns.
We also witnessed many high-profile cyber crimes in 2015, such as the infamous Ashley Madison attack in America, which exposed the personal information of 37 million users. Other companies hit include UK-based TalkTalk and Carphone Warehouse, which affected 157,000 and 2.4 million customers respectively.
However, many small businesses fail to account for cybercrime, assuming that only large companies are targeted. This is a mistake. A recent report found that 71 per cent of all cyber attacks occur at businesses with less than 100 employees.
With so much of our sensitive information, communications, and customer relationship management data stored on computers, cyber threats are a very real danger.
What can you do?
It's important to keep your software up to date. You should also have a clear security policy that's understood by everyone in your business, which includes methods to assess common threats, such as malware, phishing emails, and fraud scams.
Before yielding any sensitive information, make sure you ask for the proper verification—especially when companies request information related to your finances, employees, or clients. The UK is the most cyber-attacked country in Europe—make sure you're protecting yourself and your customers.
2. Indemnity and liability risks
Most of your clients will likely be satisfied with your services, but every once in a while a complaint will arise. However, sometimes it will be worse than a complaint—especially if your work has resulted in some kind of loss. In these situations, the last thing you want is to be on the wrong end of a legal claim with no idea how to handle it.
There are many kinds of liability risks that your business might face, including:
- Employee theft, either against your business or your clients
- Dissatisfied customers refusing to pay you
- A list of grievances against you that need to be handled as separate claims
- Negative media attention (especially if a claim is made public)
- Any situation in which you accidentally reveal sensitive information
What can you do?
Your business will be most successful if you can anticipate indemnity and liability challenges. Prepare how to respond in advance and make sure your professional indemnity insurance policy covers the aspects that concern you most. If you're prepared, you'll know exactly how to handle these risks before they occur.
For more information, visit our guide to professional liability.
3. Credit and financial challenges
The UK economy has bounced back in a big way since 2008. The Small Business Markets Reports 2015/16 shows that the UK now has 5.4 million small and medium enterprises (SMEs), with 350,000 of those springing up within the last year. Investment in SMEs also grew by 43 per cent, with business lending up by £1.26 billion.
But it's dangerous to look at those numbers and assume financial success. Business lending is unevenly spread, with 71 per cent of total SME equity investments going to London and South East based companies. Additionally, the four largest banks still account for 80 per cent of SME loans, leaving small businesses with few financial choices.
What can you do?
You've probably looked into loans and know that you should avoid racking up large debts with steep interest rates. However, another concern that often gets overlooked is business survival if one of your clients doesn't pay on time.
Perhaps the best thing you can do to protect yourself financially is to avoid customer concentration (i.e. over-reliance on one customer or client). Try not to let any one client account for more than 10 per cent of your revenue, so that your cash flow doesn't dry up should problems arise.
If you’re interested in understanding more of the biggest SME obstacles, then make sure you view our recent infographic on business longevity.