The risks posed by cyber attacks and reputational damage are increasingly worrying small and medium-sized enterprises (“SMEs”), according to Zurich Insurance Group's third annual global SME survey. The impact of competition on margins and lack of consumer demand continue to lead business' growth concerns.

According to the survey:

- Competition on margins and lack of consumer demand remain key concerns for nearly one-third of SMEs;

- Risk awareness has improved, with over 90 percent of SMEs surveyed now aware of the risks facing their business; and

- Concern over the risk of cybercrime almost tripled between 2013 and 2016, while fears about reputational damage more than doubled.

The survey polled 2,600 C-suite executives and managers at SMEs across 13 countries in Europe, the Americas, and Asia Pacific. Among respondents, concerns about cybercrime have almost tripled since 2013 (11 percent versus four percent), while worries about reputational damage also have increased (14 percent versus eight percent three years ago). These were the fastest growing perceived risks since the survey began in 2013.

Just under a third (31 percent) rated the impact of competition on margins as the greatest risk facing their business, a slight decline from previous years. Lack of consumer demand continued to be the second greatest risk, and it has increased in prominence since 2013 (30 percent versus 24 percent). Globally, SMEs' risk awareness increased over the past years; only seven percent do not see any risks for their business in 2016.

Global economic recovery and growth have led SMEs to be more optimistic about growth. In 2016, only eight percent saw no opportunities for growth, down from 16 percent in 2013. Despite this, SMEs are more focused on their home markets, reducing foreign expansion ambitions (10 percent versus 14 percent in 2013). As in previous years, SMEs have continued to reduce their costs and expenses to fund growth (33 percent versus 26 percent).

European SMEs' awareness and perception of various types of risk have increased since the survey started in 2013. Concerns about cybercrime tripled among European SMEs (12 percent versus four percent) while the perceived risk of reputational damage doubled (14 percent versus seven percent). Concerns about fire risk also doubled (10 percent today versus five percent).

More positively, European SMEs continue to benefit from low interest rates. They rank attractive credit terms among the top five opportunities – much higher than their peers in the rest of the world. A growing proportion expects costs and expenses to decline (33 percent versus 24 percent) and are exploring new customer segments (32 percent versus 27 percent).

Growth priorities and perceived risks in Latin America differ significantly from those in other regions. Since 2013, concerns about natural catastrophes have almost tripled (14 percent versus five percent). Worries about the risks of damage to corporate transport – including corporate fleets and vehicles – have more than doubled (13 percent versus five percent). But, on the bright side, confidence in partners and suppliers has increased (12 percent, as opposed to 23 percent in 2013).

Although SMEs in Latin America see fewer opportunities to diversify their offerings to customers, they are more ambitious in their merger and acquisition plans than companies in other geographies, seeing acquisitions as a viable route to growth (11 percent versus six percent in 2013).

SMEs in Asia Pacific are worried about fire, cybercrime, technological vulnerabilities, health and safety of customers or employees, and corruption, which almost doubled. However, the fastest-growing concern is the threat of reputational damage, which rose to 12 percent from two percent.

SMEs' expectations regarding growth are encouraging; SMEs in this region are far more optimistic about growth than in the past – in 2016, only 13 percent saw no opportunity to grow, versus 29 percent in 2013. Confidence has increased; many SMEs are diversifying their offerings (29 percent), new business technologies (16 percent) and acquisition of competitors (14 percent) are viewed as increasingly viable growth opportunities.

In the United States, risk awareness has risen across the board. Interestingly, technology failures and vulnerabilities feature among the top three risks in the U.S. – significantly higher than in the other regions surveyed. The SMEs' concerns over risks of theft (18 percent versus nine percent) and damage related to corporate transport (14 percent versus six percent) also roughly doubled.