Growing pains: SME identity crisis increases risks from globalisation

Do SMEs who start as local have their heads in the sand when it comes to global threats?

There have been countless studies reciting the same three factors that are holding UK small businesses back from achieving stronger growth: a lack of funding, skills shortages and red tape.

And for good reason – these are very important issues that need to be discussed. However, one serious topic that is yet to be widely recognised by the small business community – and indeed the Government and professional advisers – is the global opportunities and risks presented by the nature of business operations today.

Technology and globalisation have quickly created an environment where all businesses are exposed to global opportunities and susceptible to global risks – be it a local shop or a multinational company. Issues such as cyber security, banking fraud, economic turmoil and volatile currency fluctuations are now a problem for even the smallest of organisations.

For example, if a small business owns a website, they could become the victim of a hack, bringing down their main source of sales and marketing for days. If their business accounts are connected to online banking, they could be the subject of fraud, affecting their balance and cashflow.

Growing pains

If they purchase or sell products or services abroad, they could encounter any number of issues, from supply chain disruption to loss of a major supplier and injury or a hijack while travelling overseas.

>See also: Do SMEs really need to pay big money for legal advice?

The fact that these issues are not being discussed could cause big problems for SMEs, for two reasons. Firstly, many small companies don’t realise that they are vulnerable to these threats and therefore haven’t implemented a global risk management plan. Secondly, this local mindset is shielding them from all of the many opportunities abroad, such as accessing a lower cost base, new emerging markets and global expansion.

We spoke to more than 1,000 SME owners and leaders in the UK to understand their opinions on their global opportunities and risk exposure. The research The New Internationals reveals that UK SMEs are having an identity crisis, which could be costing them dearly.

The vast majority (92%) of SME owners believe they started out as a local or UK business – despite evidence of internationalised business operations – and 82% admit that they are more concerned about local risks than global ones.

This is understandable; local risks and opportunities are far easier to comprehend. They are literally on your doorstep. But the current business environment has moved on leaps and bounds, and the days of ‘local-by-default’ companies no longer exist. While these global risks may seem unlikely, the number of companies that have experienced these incidents is higher than you might think, and is likely to continue rising.

In fact, more than a quarter (29%) of SME leaders have experienced such an incident, including web and social media hacks (17%) and cyber attacks (16%). Even minimal operations abroad have caused serious threats to small companies, with one in 10 SME leaders admitting they have experienced bribery and corruption and 9% having had employees injure themselves while working overseas.

Closer international ties

UK businesses have been increasing their exposure overseas in recent years. The European Union has long encouraged a closer working relationship between companies within Europe, and incentivised trade deals within the region. As a result, importing and exporting is becoming much easier for smaller companies – and these international growth opportunities originate from many regions beyond Europe.

>Related: International expansion – picking the right moment

While risk is an inherent part of growth, it’s also important for SMEs to consider the opportunities that are now available to them. Once these international threats are recognised and planned for, they can be mitigated against, allowing for significant international growth and exciting new deals from abroad. Access to global markets, skills and talent can bring numerous benefits for ambitious small companies.

While it’s important for SMEs to be proactive in their efforts to mitigate global risks and seize global chances, it is also important for the Government to do more to help UK businesses operate internationally. The introduction of new schemes and trade missions is a good start, but SMEs want and need more support to help them on their journey.

Our research shows that two-thirds (67%) of SME owners believe the UK Government’s support in this respect is improving. However, 62% also believe that they are being held back by red tape, and more than half (55%) would like more help dealing with the uncertainty around the potential scenario of the UK leaving the EU.

Until perceptions of small businesses catch up with reality, it is likely that firms will remain under-exposed to international opportunities and over-exposed to international risks. Clearly, this isn’t ideal and all small company leaders and owners must reconsider whether they really are a local business, or if they are suffering from an identity crisis.

David Swigciski is SME Trading Director at RSA

Further reading: Digital marketing trends to look out for

Praseeda Nair

Praseeda Nair

Praseeda was Editor for from 2016 to 2018.