90% of SME are being kept awake at night over business risks

Starting a business has never been easy, but for many founders today, it can feel like the pressure is coming from all sides at once. And with this week marking Mental Health Awareness Week, it’s a timely reminder of just how closely business pressures and personal well-being are linked.

From cyber attacks and data breaches to inflation, supply chain disruption, and the risk of legal claims, SME owners are having to think much more broadly about what could go wrong. And with margins often tight, even one unexpected issue can have a serious knock-on effect on cash flow, confidence, and long-term plans.

A survey by Hiscox reveals just how widespread these concerns have become, revealing that over nine in ten business owners are losing sleep over these kinds of risks – showing a grim reality of founders having to constantly juggle everyday demands with larger and harder-to-control external risks.

SMEs fear cyber threats the most, but lack understanding of insurance

With cyber attacks growing increasingly sophisticated – and even major brands like Marks & Spencer and The Co-op falling victim – it’s no surprise that the threat is keeping many founders tossing and turning.

Surveying over 1,000 SMEs in the UK, the Global Protection Gap Report by business insurance firm Hiscox reveals that cyber attacks or data breaches were cited as the most common fear among 38% of businesses.

In just the last 12 months alone, around 612,000 businesses in the UK reported experiencing a cyber breach – including 42% of micro businesses and 46% of small businesses.

Concerningly, though, Hiscox’s report also found that 77% of SMEs say they don’t understand cyber insurance. As a result, over 60% of UK businesses still don’t have any kind of cyber insurance or security measures in place.

What else is keeping businesses up at night?

Cybersecurity is far from the only worry that SME owners are facing, as many also cite inflation and rising costs (37%), economic downturn (33%) and lawsuits or legal claims (28%) among their biggest fears.

Unsurprisingly, the conflict in the Middle East is painting a grim outlook for businesses across the country, particularly with the number of those in “critical financial distress” increasing by a third since the war started.

As a result, fear or recession among UK SMEs has hit a two-year high, particularly over energy costs and supply chain disruptions following the conflict in the Middle East.

According to a survey published by Credit Connect, 70% of SMEs are worried about the prospect of recession – the highest level since Q3 2023. The same percentage is also concerned about energy prices, while 78% expect supply chain disruption to have a negative impact on their business’s performance.

In terms of legal worries, Hiscox’s report found that 80% of businesses don’t understand professional indemnity insurance, and so risk being left exposed to costly claims, legal fees, and reputational damage if something goes wrong. After all, research published by The Legal Director reveals that SMEs are losing over £13.6bn a year by failing to address legal issues early, with firms facing eight legal challenges per year.

How businesses should manage these risks and get their sleep back

To help offset these anxieties, businesses should act now to strengthen their resilience across financial, operational, and risk management areas.

For example, those in need of cyber insurance or professional indemnity insurance should speak to either a specialist broker or take time to compare policies online. Providers such as Hiscox, AXA UK and Simply Business offer tailored cover for SMEs, with policies designed to protect against everything from cyber attacks and data breaches to costly legal claims and client disputes.

For those worried about inflation, it’s important to stay proactive rather than simply taking on higher costs, such as reviewing supplier contracts or improving cash flow forecasts. Diversifying suppliers can also help reduce exposure to geopolitical disruption and sudden price increases, and regularly reviewing pricing strategies – including communicating any changes clearly to customers – can help businesses protect profit margins without damaging trust. 

Lynsey Kitching, co-founder and director of CAPE People Development, also shares her advice on how business owners can handle everyday tasks with other important demands.

“Build a regular rhythm into the calendar and treat it as a non-negotiable. We often use the ‘glass jar’ model to illustrate this,” she advises.

“If you fill your time with ‘sand’ (the reactive, day-to-day demands), there isn’t enough room to fit in the ‘rocks’ (the strategic priorities, risk reviews and governance tasks). They need allocated space before reactive tasks fill the space. Protecting your energy is part of protecting your business.”