Revealed – what are Hong Kong SMEs worried about?

Top insurer's survey outlines SMEs' business risk concerns, among others

Revealed – what are Hong Kong SMEs worried about?

Insurance News

By Mika Pangilinan

Small and medium enterprises (SMEs) in Hong Kong have regained an optimistic outlook on their business and economy, with some concerns about a possible economic downturn, customer acquisition challenges, and rising business costs remaining.

This is according to a survey recently conducted by QBE Hong Kong, which draws on responses from 422 SMEs across multiple industries in 2022.

About two out of five (39%) of the Hong Kong SMEs that participated in the survey reported a decline in overall sales and said that their economic outlook had become more negative in the past year, while one-third (33%) of respondents felt the opposite way.

In particular, when asked about their outlook for the next 12 months, nearly half (47%) of participating SMEs said they have a positive business outlook and are anticipating business sales will increase.

Despite this generally positive outlook, 38% of SMEs revealed they were concerned about how a possible economic downturn in Hong Kong and other markets could impact their business, revealing an increase of eight percentage points from the results of the 2021 survey.

Hong Kong SMEs identified deteriorating investor and consumer confidence, rising global inflation, and decrease demand from Hong Kong customers as the three economic conditions most likely to worsen. They also voiced concerns about customer retention and acquisition (37%) and rising business costs (34%).

Furthermore, the concerns of SMEs in directors’ liability due to allegations of being involved in wrongful acts have gradually grown from 18% in 2020 to 26% in 2022.

With these business concerns, SMEs expressed they are expecting to increase spending on staff training, staff numbers, staff size and market in the next 12 months, while also remaining focused on cost control.

Hong Kong SMEs reconsider raising overseas profiles

In 2022, the number of Hong Kong SMEs with overseas representation declined to 29% from 37% in the previous year. Despite this, almost half (47%) of SMEs said they intend to raise their overseas profile over the next one to two years, reflecting brewing concerns about customer acquisition within Hong Kong.

Additionally, SMEs’ awareness of having multi-country insurance decreased from 43% in 2021 to 37% in 2020. Knowledge of multi-country insurance was also found to be highest among the largest SMEs, with those already internationalised intending to expand further.

Finally, among SMEs without international presence, 14% had plans to expand into other markets and 72% said they would consider buying multi-country insurance.

“While some SMEs are concerned about potential economic headwinds, they appear to be to cautiously optimistic about the year ahead and hope to expand within Hong Kong and overseas,” said Lei Yu, CEO for North Asia and regional head of distribution, QBE Asia.

“Managing insurance policies across different markets can be a challenge, from ever-changing local laws, market practices and coverage requirements, to tax regulations, logistics, and cultural differences. However, their concerns about cost control may lead them to overlook the value of insurance as a tool to manage risks.”

Despite business risk concerns, most SMEs do not have relevant insurance

QBE’s survey also narrowed down the business risks that Hong Kong SMEs find most concerning, with the loss of income due to business interruptions (75%) leading the list, followed by losing key staff (70%) and equipment breakdown (69%).

While concerns about these events have risen steadily over the last three years, only 15%, 16% and 18% held the relevant SME insurance, respectively, to mitigate such risks.

“Strategic planning for business continuity is critical to SMEs as it ensures business resilience and helps them respond quickly in case of interruptions,” said Lei.

“Insurance can play a critical role in helping SMEs ride out business interruptions including equipment breakdowns, damage to property and public liability claims as they navigate an uncertain economic environment. At QBE, we believe having the right insurance protection in place gives SMEs peace of mind and the confidence to focus on their business. We are always ready to provide advice and guidance to help SMEs find the most appropriate and cost-effective insurance solutions for their business.”

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