Small and medium enterprises make up 99% of enterprises in Singapore and contribute to nearly half of its GDP. As such, it would be fair to say that the success of SMEs here has a direct impact on the growth of Singapore’s economy and its job market.
Having faced a volatile 2016, with many unexpected twist and turns in global events such as Brexit and the recent outcome of the US elections affecting global markets, it is no wonder that many SMEs here are apprehensive of the year ahead.
On a whole, SMEs in Singapore do not expect to achieve any growth over the next 12 months.
When queried on their outlook on sales and profitability, 36% of SMEs think sales will decrease. Meanwhile, 37% think profitability for their businesses will decrease over the next 12 months, a recent survey by QBE Singapore found.
QBE insurance’s second iteration of its yearly SMEs sentiment survey also found that less than 30% of SMEs think profitability and sales will increase over the next 12 months.
The survey involved 450 SMEs and focused on the overall sentiment of Singapore’s SMEs toward key economic and business issues.
Slowing global growth sent an index that measures the sentiments of SMEs to its lowest score since it was first published at the start of 2010.
Other than the economic downturn, unfulfilled client payments were the most common issue faced by SMEs in the past 12 months, survey results showed.
However, while the majority of SMEs expect volatility ahead, many are insufficiently prepared for it, QBE said. Almost 10% of SMEs still do not carry any form of insurance to mitigate such risks.
QBE also found that over half of the companies polled are content to operate with only the most basic, mandated levels of insurance. Most SMEs hold insurance for general issues such as employee injury and theft, but hold lesser or no insurance for more specialised issues.
“This is an alarming fact given these companies have run into more specific business issues like unfulfilled client payments and liability in the past 12 months,” QBE Singapore’s CEO Karl Hamann said.
“Operating with only basic, mandated levels of insurance leaves SMEs vulnerable and susceptible to risk brought about by more specific but equally common business issues.”
The survey also revealed that while the majority (75%) of SMEs polled had a moderate to high level of concern against the loss of income due to business interruptions, only a minority (21%) actually hold insurance to mitigate this risk.
Similarly, 64% of SMEs expressed concern about damage or loss of inventory, but just 26% said they hold insurance for this risk.
These gaps between the levels of concern exhibited by SMEs toward certain issues and the actual level of insurance they hold against such risk suggest some SMEs are ignoring or de-emphasizing key risks to their businesses, QBE’s survey reported.