Majority of UAE SMEs overlook key risks to business
Small and medium sized enterprises (SMEs) in the United Arab Emirates are overlooking the key risks to their business such as fire and supply chain disruption, according to the 2014 Global SME Survey released today by global insurer Zurich and Dubai SME, the agency of the Department for Economic Development in Dubai mandated to develop the SME sector.
The survey finds SME owners are more concerned with risks that may impact the profitability of their business. One in three SMEs (33%) cite high competition as a key risk, while 20% are concerned about weak consumer demand. Legal and fiscal problems (16%) rank third among the biggest risks listed by SMEs in the UAE.
The 2014 Global SME Survey asked 3,800 senior executives of SMEs around the world, including 200 in the UAE, to rank the top three risks faced by their businesses.
The survey found that only about one-in-ten SMEs in the UAE (11%) believe fire to be a major risk, despite regular reports of fires destroying business premises across the country. A similar low number (8%) view the failure of partners and suppliers as a risk to their business. Zurichs own experience suggests that these supply chain risks, which sit outside the direct control of the business, are among the most prevalent and devastating risks for an SME. In contrast, SMEs in Morocco (25%) and Turkey (24%) recognize the potential risk posed by supply chain disruption.
Other risks that SMEs in the UAE underestimate include the health and safety of customers or employees, which only concerns 14% of business. Whereas in Austria and Germany, 32% and 24% of SMEs respectively considered customer or employee health and safety a key risk, the second most common response in each country.
Cybercrime, damage to company vehicles and natural catastrophes/unpredictable weather, while all ranked low, have significantly grown as a perceived risk. The number of SMEs concerned about cybercrime has increased from 6% in 2013 to 10% in 2014; damage to vehicles has also risen from 6% to 10%; while concerns over natural catastrophes and the weather are up from 4% to 8% in 2014.
Meanwhile, theft has dramatically fallen as a perceived risk with 11% of SMEs listing it in 2014 compared to 18% in 2013.
Zahir Sharif, Retail Director, Zurich Insurance Middle East, said: Running a business is risky. It is one of the reasons we admire people who launch, lead and work for SMEs. But these findings strongly suggest that SMEs in the UAE are far more focused on risks affecting their bottom line than asymmetrical risks like supply chain disruption or fire that could destroy their business.
Clint Draper, Head of SME, Zurich Insurance Middle East added: SME entrepreneurs often invest their own money as well as their time, talent and energy to realize their dream of owning and managing their own business. Our role as an insurer is to help these businesses prioritize their risks and protect themselves against them. Having the correct insurance can mitigate the risks, protect cash flow and provide a stable foundation for long-term success.
Commented H.E Abdul Baset Al Janahi, Chief Executive Officer, Mohammed Bin Rashid Establishment for SMEs (Dubai SME): The survey reveals that UAE SMEs need to seriously address gaps in their exposure to risk, especially when SMEs constitute more than 90 % of the total business establishments in the UAE. SMEs that understand business risks and take measures to protect their businesses tend to benefit in the long term. While our SMEs are generally doing well, they should not take their business growth for granted.
Abdul Baset added: Dubai SME is pleased to partner Zurich Insurance Middle East to help our SMEs better understand business risks and enhance their capabilities to protect their businesses. We hope that more SMEs with the vision to grow will embrace risk management to better manage their business growth.
Dubai SME signed a Memorandum of Understanding with Zurich in April 2014 to provide insurance advice and risk management insights to the Dubai SME100 companies. Under the terms of the MoU, Zurich organizes SME seminars on insurance and risk management, and also offer bespoke insurance advice covering both general and life insurance to the SME100 firms.
This latest report follows on from surveys published in September 2014, which found that more than a quarter of SMEs in the UAE expanded their domestic sales in the past year, and in October 2014, revealing that SMEs are bullish about opportunity to acquire new customers.
Global differences
In Europe, SMEs are more focused on customer and employee safety, particularly in Germany (24%) and Austria (32%) where it is an even greater concern than lack of consumer demand.
Companies in Latin America are generally more concerned about theft with the exception of Brazil which sees a greater emphasis on legal and fiscal problems (16%), the potential failure of a partner or supplier (18%) and fire (17%).
Corruption is a more important risk for SMEs in South Africa (16%), Mexico (13%) and Morocco (13%) than for Europe (7%). In Morocco (25%) and Turkey (24%) there are greater concerns over the potential failure of a partner or supplier.
In Asia-Pacific concerns over natural catastrophes and unpredictable weather are understandably high in Hong Kong (28%) and Taiwan (34%).
