Challenges for small and medium-sized enterprises

We’ve seen how large organisations can use business continuity and crisis management but what challenges do small and medium-sized enterprises (SMEs) face in establishing, implementing and maintaining business continuity management systems and in responding to crises?

The UK Companies’ Act requires that two out of three characteristics are met for a business to be defined as an SME:

  • Turnover (less than £25m)
  • Employees (less than 250)
  • Gross assets (less than £12.5m)

In the USA, the characteristics of a business to be defined as small/medium vary sector by sector. As an example, manufacturing companies with 500 employees or fewer, and most non-manufacturing businesses with average annual receipts (gross income) under $7.5m will qualify as a small business (SBA n.d.).

The UK’s Federation of Small Businesses reported that, at the start of 2018, total employment in SMEs was 16.3 million (60% of all private sector employment) and had a combined annual turnover of £2tn (52% of all private sector turnover). SME’s are, therefore, a ‘driving force in job creation and local economic development’ (Siddiqi 2015).

For this reason, their resilience is important to the local and national communities. They provide jobs (directly and as a part of the supply chain), create a market for goods and services, are innovators and entrepreneurs and, as a result, play a large role in the economy (BC for Dummies 2017).

In a survey by the British Insurance Brokers Association (2011), the emergencies and disruptions that respondents most frequently had to deal with were for flood and escape of water at 41.1% and fire at 32.7% - so it is likely that an SME may have to face some form of a disruptive event. How they respond to this will affect their long or even short-term viability.

Two examples of crises that have had documented effects on SMEs include:

  • Storm Desmond in Cumbria in 2015, where businesses reported structural damage to their premises, 50% reported the problems as ongoing when interviewed up to six months after the event. Of the 65% of businesses suffering a negative impact of the storms and flooding; 60% reported a financial loss or additional costs as a result (BMG Research 2015).
  • More than 40% of businesses affected by the Manchester bombing went out of business (NaCTSO)

SMEs can be the least prepared and the most significantly affected (Sullivan-Taylor and Branicki 2011) often because they have more limited human, technological and/or financial resources to develop plans and respond to incidents.

But they may have some benefits, associated with a simpler governance structure that allows for quicker decision making, better communication and less bureaucracy (Vossen 1998).

Not only is the ability to respond to disruptive events a benefit of employing business continuity management, but 61.6% of respondents to the 2011 BIBA survey said that those businesses with a Business Continuity Plan (BCP) will benefit from premium discounts on insurance or a reduced excess costs as a BCP may turn an unacceptable risk into one which insurers would underwrite.

Furthermore, a number of SMEs found that having a BCP may create new opportunities for business development.

Under the UK Civil Contingencies Act (2004), local authorities have a duty to promote the importance of BCM to commercial and voluntary organisations operating within their geographical boundaries. This duty does not require the local authority to undertake BCM for such organisations, but to actively promote the benefits of BCM.

Many local authorities have developed BCM networking events, leaflets and provided basic information about BCM on their websites. One example is Wakefield Metropolitan District council who have combined website information on public emergencies and BCM advice and guidance.

Your task

What challenges do you think SMEs would face when developing implementing and maintaining a business continuity management system?

What, if any, adaptations would you have to make to the business continuity lifecycle?


References

SBA (n.d.) Size Standards [online] available from https://www.sba.gov/federal-contracting/contracting-guide/size-standards

Siddiqi, L. (2015) 5 Ways to Help Finance SMEs [online] available from https://www.weforum.org/agenda/2015/01/5-ways-to-help-finance-smes/ [07 May 2019]

Sterling, S., Payne, Duddridge, B., Elliott, A. (2017) Business Continuity for Dummies. John Wiley and Sons.

BMG Research (2016) Cumbria Business Survey 2015/16 – Flood Impact Report [online] available from https://www.cumbria.gov.uk/eLibrary/Content/Internet/536/671/4674/17217/17225/4331215318.pdf [07 May 2019]

National Counter Terrorism Security Office (2014) Expecting The Unexpected: Business Continuity in an Uncertain World [online] available from https://www.gov.uk/government/publications/business-continuity-planning [07 May 2019]

Sullivan-Taylor, B., Branicki, L. (2011) ‘Creating Resilient SMEs: Why One Size Might Not Fit All’. International Journal of Production Research 49 (18), 5565–5579

Vossen, R.W. (1998) ‘Relative Strengths and Weaknesses of Small Firms in Innovation’. International Small Business Journal 16, 88–94

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This article is from the free online course:

Business Continuity Management and Crisis Management: An Introduction

Coventry University