According to Ben Bierman, the CFO of Business Partners Limited, SMEs should be wary when cutting business costs, as certain expenses should not necessarily be eliminated. He says that recent research has indicated that a majority of South African SMEs do not believe that that they are in danger of cyber attacks, while in reality they are increasingly becoming the targets and victims of online criminal activity.
Bierman says that as businesses became more reliant on technology it is imperative that SMEs protect themselves against the potential dangers of cybercrime.
He believes the global economic downturn has placed immense pressures on the SME market. “Many SMEs are fighting for survival at the moment, and one commonly-used survival strategy is cutting back on non-essential expenditure. Discretionary spend, which often includes expenditure on training, insurance and other risk management costs, such as cyber security, are often cut first in order to protect the core aspects of the business, which must remain intact for the business to survive.”
According to Bierman, indiscriminate cost cutting can be potentially fatal to the survival of an SME and can possibly further expose a company to volatile market conditions, putting the very survival of the business in at risk. He believes that one of the major areas of concern is the lack of protection measures against the growing risks of cybercrime.
“The significant growth in cybercrime poses a very serious risk to all SMEs. The increased use of technology in all businesses, specifically in the areas of communication and electronic banking, has made businesses, especially SMEs, increasingly reliant on technology.”
He points to the recent hacking of LinkedIn as a warning to business owners on the dangers and abilities of cyber criminals.
Research from Lion of Africa Insurance recently revealed that cybercrime cost South Africa over R4 million in 2011 as 4 646 adults fell prey to cybercrime on a daily basis. “An additional R7.1 million was spent last year alone in attempting to ratify these crimes.”
Bierman suggests that SMEs are far more vulnerable and prone to cyber attacks and emphasises the danger of not insuring against such an event. “Research from the Verizon 2011 Data Breach Report not only revealed that cyber attacks are becoming increasingly more frequent, but found that businesses with between 11 and 100 employees were six times more likely to become a victim of cybercrime than larger corporations.
“The most distressing result was that 85% of small business owners were not worried about the risks of a cyber attack and believed they were not at any risk. A majority of these respondents also revealed that they were unlikely to put any protective measures in place.”
He does however encourage SMEs to reduce costs in order to enjoy the advantages of improved cost efficiencies, but warns small business owners to carefully evaluate each item within their cost structure. “Often the easiest cost items to eliminate over the short-term can harm a business the most over the long-term,” concludes Bierman.