- Research shows People and IT are viewed as highest risk by SME owners
- SME reliance on insurance policies as risk management ‘a serious mistake’
London 7th May 2006 – Vantis, the AIM listed accountants, tax and business advisors, have launched a risk management service for growing businesses in association with Capcon, the risk management company.
The service aims to help growing businesses identify risks and maintain business continuity in the event of threats to personnel, products and systems. Comprehensive risk management has traditionally been perceived as too expensive for SMEs and those businesses operating under tight margins. Vantis aims to address this by providing a simple, cost-effective risk management service.
According to Rupert Reid from Vantis, “Risk management is traditionally seen as the preserve of larger organisations and can be seen as a luxury cost for SMEs who prefer to rely on their insurance policies to cover them in the event of disruption. This is a mistake. There are a number of impact areas where the cost of disruption may not be covered by business insurance: lost time, sick pay, damage or loss of raw materials, repairs to plants and equipment, extra wages, overtime and temporary labour, production delays, investigation time, fines, loss of contracts, legal costs and loss or reputation. The list goes on….”
- According to recent research the main risk areas for SMEs are:
People (duty of care to employees)
- IT (e.g. computer failure)
- Market changes / sales (e.g. lack of product development)
- Corporate reputation and brand impairment (e.g. adverse comment in press)
These are followed by ‘second tier’ risks such as:
- Financial (e.g. poor management information)
- Credit (e.g. the default of a major customer)
- Fire / explosion (e.g. poorly maintained power supplies)
- Product liability (e.g. increasing product returns)
- Business interruption (e.g. failure of a major supplier)
- Safety of employees (e.g. inadequately maintained equipment)
- Directors liability (e.g. negligent oversight on acquisition)
- Security of property (e.g. keeping out intruders)
The research also revealed that 27% of SME management discuss the risk profile of the business annually or less often, while 19% discuss specific risks annually or less often.
According to Bob Dulieu of Capcon, “Companies should regularly review the risk to their operations and profitability. Risks to today’s businesses are diverse: terrorism, personal security or a pandemic outbreak to business interruption, illness or a product recall. These affect all businesses irrelevant of size and, with the growth of health and safety concerns, businesses not addressing risks to their employees can face legal action if incidents do occur. The adage ‘fail to plan and you plan to fail’ is very apt for all companies especially given the focus that the government is placing on this area”.
In the light of increasing corporate governance and more stringent shareholder requirements, many larger organisations are also requiring their suppliers to adhere to the same standard they are bound by ensuring their profits aren’t affected by suppliers further down the supply chain. With suppliers required to prove they can operate in the event of disruption, a review can actually help save time and money and can be seen as an effective marketing tool.
The resulting plans need to be simple, straightforward and flexible enabling them to be easily understood, accepted and adopted by those responsible for ensuring business continuity.