Almost half of mid-market businesses feel unprepared for risk despite investing in risk management,
The Agency Forward survey suggests mid-market business owners are concerned about economic and financial risks, regulatory changes, technological disruption and workforce shortages. Only, 54% of respondents said they feel highly protected against these threats. The survey included 400 middle-market business owners.
Mark McGhiey, leader of risk management and client services, at Nationwide shared responses with Digital Insurance related to how mid-market businesses can improve resiliency and handle challenges.
What risks are middle market businesses most unprepared for and why?
The most pressing concerns include economic downturns, supply chain disruptions, cybersecurity threats, and evolving regulatory changes. Unsurprisingly, economic uncertainty is a major factor on business owners' minds today, with 43% reporting that navigating economic challenges is a top priority for their risk management program.
Additionally, 42% of businesses continue to struggle with supply chain vulnerabilities and cybersecurity threats, which do not usually have simple fixes given their complexities. Lastly, regulatory changes remain a challenge, as businesses must adapt to new compliance requirements and one in five business owners say they're not prepared to do so.
What significant regulatory changes will impact middle-market businesses, and what resources are available to help them navigate these changes?
Businesses are facing a shifting regulatory landscape, particularly in areas such as taxes, data protection, environmental impacts, and labor laws. Staying compliant with current regulations is a top concern for middle market businesses and 78% of owners say regulatory changes also impact their risk management needs and initiatives.
Many companies have turned to technology to help keep up with regulatory changes and risk management needs, with 76% using technology in specific areas or comprehensively. Consulting with legal and risk management professionals is also a valuable resource for staying ahead of new laws. Your carrier should have specialized risk management experts who can help provide guidance on the changes expected for your industry.
Can you explain any innovative risk management strategies that businesses should be considering?
While innovation is valuable, not all effective risk management strategies need to be expensive or complex. In fact, our experts regularly identify practical, cost-efficient solutions that achieve the same safety outcomes while seamlessly integrating into daily operations. The key is tailoring risk management efforts to a business's unique needs rather than defaulting to costly, one-size-fits-all approaches.
For middle market businesses, working with the right risk management partner is critical. A knowledgeable partner—one who understands the industry, operational challenges, and specific exposures—can help navigate complex risks with efficient, targeted solutions. By focusing on what truly works for their business, companies can strengthen their risk management efforts without unnecessary costs or disruptions.
How can insurance carriers and agents or brokers help businesses with risk management?
Insurance carriers and distribution professionals can play a critical role in helping businesses mitigate risks and navigate future challenges. Specialized carriers provide industry-specific expertise, resources and services, helping companies understand their unique exposures and cost-effective ways to address them.
Additionally, carrier-provided risk management experts, along with agents/brokers, can help with reviewing clients' risk management policies to identify potential gaps that need to be filled. This is a critical step for the industry to reinforce with customers, considering that one in five middle market businesses lack a business continuity plan, leaving them exposed to costly disruptions that could hurt their operations. By leveraging the insights, resources and services offered by their insurance carrier or agent partner, businesses can implement stronger risk management strategies tailored to their operations and business goals.
How do talent shortages, skills gaps, and employees retiring from the industry impact risk management?
Workforce challenges are an increasing concern in risk management, especially as industries like construction, manufacturing, and healthcare face talent shortages due to an aging workforce. As businesses struggle to find skilled workers, operational inefficiencies and safety risks grow as employees take on more responsibilities.
Additionally, when experienced employees retire, they take institutional knowledge with them, creating gaps in expertise. While it's important to address these challenges through workforce development programs and knowledge-sharing initiatives, it's also equally important to maintain rigorous hiring and training standards to ensure new workers are adequately prepared – preventing unnecessary safety risks and avoiding situations where inexperience leads to costly mistakes.
How is climate change impacting risk management?
Climate risk presents significant hurdles for businesses, whether they're in a coastal region or not. Extreme weather events—such as hurricanes, wildfires, and flooding—can damage or destroy property or assets the business relies on for its operations. Severe convective storms have also increased considerably in frequency and have made it important to plan for weather impacts in areas that traditionally weren't impacted by natural disasters. Finally, it's also important to consider supply chain impacts if there's a weather event that prevents your business from being able to receive the supplies it needs.
As weather risks continue to grow more common and more unpredictable, businesses must have strong business continuity plans and incorporate climate resilience into their risk management strategies.
Anything else you'd like to share?
The key takeaway is that middle market businesses must take a proactive approach to risk management. By partnering with the right experts and leveraging innovative and tailored risk mitigation strategies, businesses can strengthen their ability to withstand risks and seize growth opportunities.
