As Business Owners’ Level of Concern for Risks Has Decreased, the Risks Themselves Have Not – and Many May Not Be Adequately Prepared

As Business Owners’ Level of Concern for Risks Has Decreased, the Risks Themselves Have Not – and Many May Not Be Adequately Prepared

By: Lucas Prahl, Head of Middle Market at QBE North America

There is an age-old saying, “failing to plan is planning to fail,” and according to QBE North America’s 2023 Mid-Sized Company Risk Report, some businesses may be headed in that direction.

While financial, digital and organizational concerns remain consistent as the top areas of worry for mid-sized business owners, there has been an overall decrease in their concern for all risks – at 54 percent, down from 65 percent in 2022.

As business owners’ level of concern has decreased, so has their level of preparedness, a fact that could prove troublesome as potential risks remain ever present. 
The specific areas which remain consistent as top worries include financial risk related to fraud, operational performance and liquidity; digital risk, encompassing cyberattacks, extended system outages and corporate espionage; and organizational risk, driven by challenges in attracting and retaining talent, demographic shifts in the talent pool and internal bias.

These key areas of concern reflect the complex landscape mid-sized companies navigate, yet the percentage of companies with a risk mitigation plan for each macro risk decreased. This percentage has declined from 46 percent in 2022 to 43 percent in 2023.

The report’s findings show a clear contrast, with some mid-sized companies making strides in addressing their highest concerns, while the broader preparedness landscape reveals substantial room for growth. This is startling, as a lack of adequate risk mitigation planning leaves businesses vulnerable to major disruption.

Shifting from a sole focus on cost considerations, the report reveals that companies desire personalized risk management solutions. More than half of mid-sized companies expressed interest in industry-customized advice and nearly half are seeking insurance products tailored to their unique business needs. The report further underscores this trend by indicating that, while interest in loss control specialists slightly decreased from the previous year, it remains significantly higher than pre-pandemic levels, suggesting an enduring recognition of insurers' expertise in risk management.

Additional findings from the 2023 report include: 

  • Financial and digital risks have maintained their position as the most concerning macro risks for four consecutive years. Organizational and macroeconomic risks rose in the rankings, while pandemic-related and liability risks saw significant declines.
  • Cyberattacks persist as the most concerning micro risk, consistently upholding their position as a significant concern within the digital risk category. Other micro risks included fragile supply chain, recession, inflation, attracting/retaining talent, fraud, operational performance and breach of privacy.
  • Organizational risk overtook business interruption as the third-most concerning, primarily fueled by challenges in talent attraction and retention, as well as demographic shifts in the talent pool.
  • Reputational risk rose, driven by concerns about product quality, customer service and employee conduct, while poor ESG ratings became less concerning.
  • Macroeconomic risk rose due to concerns about recession and inflation, reflecting broader economic trends.

In today’s rapidly changing environment, the development of comprehensive and tailored risk management strategies is critical and could mean the difference in a business’s livelihood, should a serious event occur.

We suggest that business owners assess their company’s vulnerabilities in key risk areas, develop strategies to address these concerns, and regularly review and test their plans. Doing so can help business owners feel empowered to navigate challenges with resilience and strategic foresight. For more information on risk mitigation planning, visit QBE North America’s Risk Solutions Tools & Resources page, and view the full 2023 Mid-Sized Company Risk Report.