Top Tips for SMEs on Managing Business Risk

Are UK SMES MANAGING their RISK? Allianz Insurance, parent company of Premierline Direct, surveyed over 300 UK SME BUSINESS OWNERS to understand their attitude towards risk management: FINANCE (66) HOSPITALITY (26) CONSTRUCTION (52) MARKETING (25) TRANSPORT (49) PROPERTY (16) RETAIL (38) VARIOUS OTHERS (28) TOP RISK CONCERNS 6 MOST FEARED RISKS vs 6 MOST COMMON RISKS ENCOUNTERED 31 23% CLIENTS / CUSTOMERS NOT PAYING CLIENTS / CUSTOMERS NOT PAYING 31% 17% NATURAL WEATHER DISASTERS ACCIDENTAL DAMAGE 22 16% SUPPLIERS MISSING DEADLINES SUPPLIERS MISSING DEADLINES CUSTOMERS COMPLAINING 20% 16% NATURAL WEATHER DISASTERS 19% 13% FAULTY GOODS FAULTY GOODS UNDERPERFORMING EMPLOYEES 11% CUSTOMERS COMPLAINING IS RISK MANAGEMENT A MAJOR ISSUE? IS RISK A PRIORITY FOLLOWING A BAD INCIDENT? 34% 24% YES - A SIGNIFICANT PRIORITY 10% ALWAYS PLAN AHEAD 3% AIM TO TRY HARDER NO 30% 40% 21% PLAN TO AVOID SAME INCIDENT 35% SOMEWHAT PLAN DON'T KNOW YES - A SLIGHT PRIORITY NO CHANGE PLANNING FOR THE FUTURE ACTIONS TO MITIGATE RISKS 29% 24% 12% MANAGE SUPPLIERS MORE CAREFULLY SPEED UP PAYMENTS INCREASE PRICES 23 IMPLEMENTA GROWTH STRATEGY 27% 3. MANAGE DEBT MORE STRINGENTLY 9° 9% 19° ASK THEIR INSURER/ BROKER FOR ADVICE HIRE MORE STAFF TAKE NO ACTION WHO PLANS FOR RISK? SOURCES FOR SPECIALIST ADVICE: BUSINESS OWNER 36% 28 14% MANAGEMENT TEAM 33% MANAGEMENT INSURANCE TEAM BROKER WORKING GROUP 13% 25% EMPLOYEE 5% DO NOT 13% CONSULT EVERYONE 14% 26% EMPLOYEE EXTERNAL ADVISORS 5% WITH RISK INSURER FUNCTION NO ONE 20% KEY PRINCIPLES TO BALANCING RISK AND INNOVATION CONTROL SPEED Create a safe ground for experiments, through making risks controlled, managed and measured, by increasing risk tolerance and fostering a culture that embraces intelligent mistakes FLEXIBILITY Produce new Build a portfolio of early innovation investments, rather than relying on one or two options products and extensions to existing lines using a speedy development process (e.g. agile and rapid experimentation) RISK MANAGEMENT IN PRACTICE JAMES LOCK & CO Heritage hat-making company James Lock & Co has worked with credit insurers on risk management practices for rising international sales following its involvement with the Royal Wedding to assess new customers. Credit controller Rebecca John says: "We use credit insurance to give us peace of mind that if a customer does not pay us, or becomes insolvent, then we are covered." CO0 and co-founder Rodrigo Dauster says: "We stripped away many of the risks typically associated with a start-up. We were able to launch and start generating revenues within two months of launch with less than 10% of the budget we had originally estimated. We gained speed to market, maximised our learning and eliminated wasteful investment." MYSHOWCASE.COM MyShowcase.com sells independent beauty brands through a stylist network at private events in homes and offices, and also online. BOTTICA.COM "We are a small team, sitting next to each other, so we can put things out for test rather than going through layers of approval," she explains. Bottica.com is an online designer jewellery and accessories marketplace. Co-founder Kiyan Larizadeh says adopting the lean start-up/minimum viable product approach has been crucial to success. The process enables the business to keep innovating without taking too much risk. NEXT STEPS: MANAGING RISK FOR BUSINESS GROWTH TOP 5 TIPS TO REDUCE RISK WHILST INNOVATING Innovation stimulates growth, but trying new things can be risky. For our guide on how to reduce risk whilst innovating, click here. RESEARCH YOUR BE REALISTIC ESTABLISH AN BALANCE HANG IN THERE ABOUT THE INDEPENDENT 4 YOUR & GIVE IT A OPTIONS OUTCOMES PROJECT TEAM BUDGET FAIR CHANCE SOURCES: Allianz Risky Business Report, 2013 (http://docs.allianzebroker.co.uk/PDF/AC/General/Allianz-Risky-Business-Report-April-2013.pdf) One Poll online survey of 500 business leaders, 2013 premierline direct BUSINES S INSURANCE www.premierline.co.uk A company of Alllanz 600000