QBE Insurance has released the findings from this year's QBE Hong Kong SME Survey, conducted between November 2024 and January 2025 with input from 600 decision-makers.
The survey explored a range of business risks and opportunities, focusing on the impact of AI, cyber risks, and the appetite for insurance digitalisation.
The current business challenges are affecting a larger number of Hong Kong SMEs than in previous years.
The percentage of businesses reporting increased costs and reduced profitability surged from 40% last year to nearly 60% this year.
Additionally, around half of the respondents are facing difficulties related to talent and labour shortages, as well as financial issues like cash flow problems and limited access to funding, compared to 39% and 34% respectively last year.
The proportion of respondents encountering such challenges increased across eight different categories y-o-y.
Reflecting these findings, the economic outlook for the next 12 months appears less optimistic than it did a year ago.
Approximately 64% of respondents believe this year will be more favourable economically than the past 12 months, down from 70% last year. Contributing to this sentiment, 74% of SMEs report declining investor and customer confidence, an increase from 63% the previous year.
Respondents are also more pessimistic about their companies' performance: in the 2024 survey, 70% believed sales would improve in the coming year, while only 65% share that belief in this year's survey.
“Over the past few years, Hong Kong SMEs have become more resilient to the myriads of challenges ahead of them and continue to roll out measures designed to meet these. Three-quarters of Hong Kong SMEs have taken cost control measures, while 45% of respondents have streamlined their operations, and 42% have diversified their offerings. We believe these actions underscore the ability of local businesses to respond and adapt,” QBE Asia head of SME segment Andex Fung said.
Awareness of cyber risks among SMEs is significantly increasing.
More than half of the SMEs now report being fully aware of these risks, while 43% consider themselves somewhat informed, rising from 48% and 41% respectively.
However, the percentage of businesses that have experienced a cyber incident has also increased, from 30% in 2024 to 33% this year. This uptick may be attributed to a decrease in cyber protection activities among Hong Kong SMEs.
The latest survey indicates a decline in the use of cybersecurity solutions and software (down from 62% to 60%), staff training (from 45% to 43%), and cyber resilience consultants (from 42% to 36%).
Despite the reduction in investment in these areas, businesses are increasing spending in other aspects.
The proportion of Hong Kong SMEs hiring dedicated cybersecurity personnel has risen from 43% to 49% over the past year and the number purchasing cyber insurance has also increased from 39% to 43%.
The primary reasons for acquiring coverage this year include funding for legal services, hiring security or forensic experts and covering costs related to data breaches.
Among the 62% of respondents lacking any form of cyber insurance, 63% would consider purchasing it, while 11% would not entertain the idea at all.
Reasons for this reluctance include concerns about cost, the belief that their business does not store sensitive data, and the perception that such incidents would have a minimal impact on their operations.
“It’s heartening to see Hong Kong SMEs heighten both their knowledge as well as protection measures against cyber-attacks. The interdependency across sectors and businesses makes such risks unavoidable and the increased awareness of local SMEs demonstrates the role insurers like us can play in furthering their know-how and supporting their risk management in the current cyber risk landscape,” said Mr Fung.