As digital transformation rapidly spreads business risk is increasing. Small-medium enterprise (SME) owners and CEOs technology startup founders are falling short in both evaluating these risks and showing the right acumen for risk management, according to a new report released by Embroker, a digital business insurance platform.
The report found that owners’ and founders’ perception of business risk is not aligned with how they manage and transfer that risk. Owners and founders acknowledged critical business risks like labor shortages and product malfunctions, yet only 22% say they have read and understood all of their policies and half are relying on their brokers to sign up for coverage.
“While many SME owners and startup founders have been experiencing strong growth and financial backing in the past year, modern day risks including cyber attacks, supply chain breakdowns, and remote workforce issues can stop progress in its tracks. This means companies need to constantly evaluate risk and protect their business,” said Matt Miller, Embroker CEO. “Business insurance is a critical element in a company’s growth strategy, allowing a company to effectively transfer risk and ensure that unforeseen events don’t impede their growth – it is not a decision and process you can go through on autopilot.”
Understanding cyber attacks
SME owners’ who lack knowledge of their policies and risk assessments are leaving themselves vulnerable to emerging risks, such as data breaches and ransomware attacks.
As business threats intensify and concern grows, both owners (46%) and tech founders (57%) fear they don’t have sufficient coverage in the event of a ransomware attack. But surprisingly the concern about this risk remains low: 63% of SME owners believe they are unlikely to face a data breach or ransomware attack.
Tech Founders, on the other hand, are more aware of cyber risks than other industry business owners. 58% of tech founders believe they are likely to face a data breach or ransomware attack. However, despite understanding cyber risks, tech founders are still not securing coverage, with only 34% having cyber policies.
Does your business insurance cover cyber attacks?
According to the study, owners could be doing more to stay on top of the changes that impact their risk and act on those changes as they evaluate their business insurance renewal.
The report shows half of owners and founders rely on the expertise of a broker to sign up for coverage, and 25% rely on the broker to fully research and price out their options. Others are less engaged: 1 in 5 admitted to not knowing how their insurance purchases are handled.
When it comes to policy renewals, though, it’s clear that owners and founders need to have more thoroughness in their process. Almost one in three (29%) SME owners allow their insurance to auto-renew without making changes, while 74% of tech founders either engage with a broker or have someone internal to assess their needs and options upon renewal.
Another shortfall was that although business owners are aware of risks and concerns when it comes to their business, very few (22%) have even fully read through their policies.