Small Businesses See Stable Business Climate; Cite Cybersecurity as Top Threat – Insurance Journal

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The first quarter Small Business Index, which measures small business owner confidence, is 62.3—similar to last quarter’s score of 61.3—reflecting a stable business climate. More small businesses see an improving economy, which drove the headline score up one point.

One in three (32%) small business owners now say the U.S. economy is in good health, up seven percentage points from last quarter. Roughly two in five (38%) say their local economy is in good health, up eight percentage points from the end of 2023.

The first quarter survey sponsored by MetLife and the U.S. Chamber of Commerce also found that small businesses see cybersecurity and supply chains as their biggest threats.

“Small businesses’ perceptions of the economy are drifting upward, with businesses reporting being comfortable with their cash flow and the health of their business,” said Tom Sullivan, vice president of Small Business Policy at the U.S. Chamber of Commerce. “While many business owners have continued to struggle with high prices and rising wages, recent jobs reports are positive. While headwinds remain, confidence is ticking upward and small businesses are more resilient and prepared for unforeseen challenges.”

Top Threats

This quarter’s survey asked small businesses about their concern for future threats and their crisis planning in response to those threats. Small businesses say they are most concerned about:

  • Cybersecurity – 60%
  • Supply chain breakdowns – 58%
  • Another pandemic occurring in the future – 54%
  • Inclement weather – 45%
  • Theft – 42%
  • Natural disasters – 39%
  • Act of terrorism – 37%

Overall, most (71%) small businesses maintain they are “adequately prepared” for future threats. Most (80%) also say they have a clear idea of how to change their business if it starts to struggle.

Though these topline numbers indicate most small businesses feel prepared to handle what comes their way, across the board, most say they are only somewhat prepared to deal with them, rather than very prepared. For example, 23% say they are very prepared for cybersecurity threats, versus 50% who feel somewhat prepared. The gap is even larger in preparedness for a supply chain breakdown (14% very prepared, 47% somewhat prepared).

To address potential threats, small businesses say they are contributing to rainy-day funds (62%), installing surveillance precautions (56%), training staff on cybersecurity measures (48%), establishing formalized plans for future threats (43%), taking out insurance in case of natural disaster (38%), and building out existing supply chains (35%).

A recent EY/Institute of International Finance global survey of chief risk officers (CROs) also found that cybersecurity ranked as the highest concern. Cybersecurity topped the list (68%) for all CROs surveyed, followed by geopolitical risk (56%), environmental risk (50%), machine learning and artificial intelligence (43%), and skills shortage/re-skilling of the existing workforce (41%).

Muted Perception

According to the survey, most small businesses are reporting consistent, high satisfaction with the state of their cash flow and business health. About two-thirds say the overall health of their business is good (65%) and that they are comfortable with their current cash flow (67%).

According to the survey analysis, overall perception of the economy remains “muted” with nearly half of small businesses continuing to feel the economy is in poor health. They remain concerned about inflation with more half (52%) citing inflation as a top challenge. In addition, concern for revenue rose seven percentage points this quarter with 29% saying revenue is a top challenge, returning to a level of concern last recorded in late 2021.

The survey was conducted January 26 – February 12, 2024. The survey has a credibility interval of plus or minus 4.4 percentage points for all respondents.

Topics
Cyber
Commercial Lines
Business Insurance

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