Test Your Business Risk IQ
Business owners today have many advantages over past
generations of entrepreneurs, but perhaps the biggest of these
advantages is access to professional research. Whereas
entrepreneurs of the past could only guess at what obstacles
their businesses might encounter, today’s business owners can
compile full risk reports before they even open their doors.
However, research also shows us that humans, by nature, are more
likely to make decisions
based on emotions and beliefs
than on data, even when presented with the facts. In our survey
of 500+ business owners, CEOs, and startup founders, we
found that these leaders overprepare for relatively uncommon
risks while leaving their companies vulnerable to the threats
they’re actually likely to encounter.
Our Risk IQ Calculator compares the risk factors that apply to
your business against the threats you’ve prioritized and
prepared for. With this information, we can determine how well
your protections align with the leading threats facing companies
similar to yours. Once you’ve received your Risk IQ results,
download the
Big Risks for Small Businesses
report to see how your preparations stack up against successful
business owners and tech entrepreneurs.
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Business Leaders Overlook Pressing Risks
Were you surprised to learn you’re not as prepared as you
thought? Don’t worry—our research shows that you’re far from
alone. Even the most successful and experienced business leaders
are surprisingly unaware when it comes to business risk.
We can see an example of how skewed owners’ perceptions of risk
are by taking a look at attitudes toward cyber attacks and
cybersecurity.
Research shows that
over 40% of all cyber attacks
target small businesses, and
61% of small businesses
experienced at least one cyber attack in 2020. Despite this, 63%
of our survey respondents said they believed their business was
unlikely to face a data breach or ransomware attack.
In fact, cyber attacks—which are some of the most common and
most expensive risks to small businesses—did not appear in the
top three respondent concerns. Instead, respondents prioritized
reputational harm, product or equipment malfunctions, and labor
shortages or overworked employees.
Not only are cybersecurity attacks more likely to occur than the
risks respondents’ prioritized, but they’re also much more
expensive when they do occur. In 2021 the
average annual cost of cyberattacks
for small businesses was $25,000, whereas reputational harm
costs small businesses just
$8,000 per incident
to repair.
If cybersecurity is one of your Risk IQ blind spots, you may
want to dedicate some time to learning more about the
biggest cyber threats
businesses are likely to encounter in 2022. But cybersecurity is
just one example—across the board, owners are preparing for the
wrong risks and leaving their companies vulnerable to expensive
attacks and threats.
Leaders Need to Be More Involved in Risk Protection
It’s not hard to understand why leaders are misinformed on
threats to their businesses—according to our data, many aren’t
actually involved in their company’s risk management process.
We also asked business owners questions designed to determine
how closely they pay attention to the details, costs, and
changes to their business insurance policies. We were surprised
to learn that an astounding 57% had not even read their
insurance policies in full, and 1 in 5 weren’t actually sure who
handled insurance issues within their company.
There’s nothing wrong with delegating risk decisions to in-house
administrators or HR departments—our research shows that about 1
in 3 owners do so, and this can be a smart move since it frees
up owners and founders to focus on broader company issues and
goals. But when it comes to risks with the potential to bankrupt
the company, it’s important that CEOs make it a priority to
remain well-informed.
So, what can you do to improve your Risk IQ? Start by taking a
look at your blind spots and determining how you can add
additional protections to those already in place. These
preparedness tools can be expensive, so you may need to scale
back on protections against less pressing threat risks in order
to invest more where you’re most likely to get hit. If you find
you need to add insurance policies or expand your coverage,
bundling your policies
can help keep costs low.
Interested in learning more about how businesses handle risk?
You can access our full research results by downloading the
Big Risks for Small Businesses
report. It takes a deeper dive into how small business owners
approach issues like risk management, insurance enrollment,
policy renewals and more. Our report also separates responses
into small business owners and tech founders, providing a
fascinating peek into how attitudes differ across industries.
