Australian SMEs are leaving themselves unnecessarily exposed to the risk of “fatal business disruption”, according to a survey from accounting and advisory group Bentleys.
The biannual Voice of Australia Business Survey shows only 17% of SMEs have a formal written business continuity plan, while 34% have a risk management process.
The larger the business, the more likely it is to have either measure in place.
“A main blind spot we constantly come across with many of our clients is insurance,” Bentleys SA Director Assurance and Advisory David Papa said.
“Many are unaware of the type of insurance they require or the adequate level of insurance they need to keep their business afloat should a major disturbance occur.”
Keyperson insurance is the least-held cover, with 25% of respondent businesses having it. Goods in transit cover is purchased by 26%, while only 27% have business interruption insurance.
Building and contents insurance is more common, with 64% of businesses taking out a policy.
Mr Papa says SME owners often think “it will never happen to me”, but many businesses find it difficult to sustain operations when major disruptive events happen out of the blue.
The survey shows only 26% of businesses could survive 1-3 months if their debtors stopped paying.
Mr Papa says Australia tends to have its worst disasters between October and April, with risks including bushfires, flooding, cyclones and droughts, but it is not only natural catastrophes that can cause huge business disruptions.
“Damage or loss of the building due to fire, failure of a critical supplier or losing key people within the team all drastically affect the usual operations of a business, not to mention cashflow.”