The seventh edition of QBE Insurance’s annual survey into Singapore SMEs revealed that businesses intend to put international expansion on the backburner and also direct more focus towards employee engagement and sustainability initiatives. 

With the aim to better understand SMEs’ current behaviours and business challenges, this year’s market research survey showed that many SMEs continue to feel the adverse effects from COVID-19, with 60% of businesses unsure or having no intention to expand internationally for the next one to two years. With input from over 400 decision makers across various industries in Singapore, the survey revealed that a more conservative business mindset is being adopted across the board:

• 50% of SMEs who have business presence overseas intend to downsize in the next one to two years
• 53% of small SMEs who are internationalised, intend to decrease their overseas presence

The top three concerns around internationalisation plans were pandemic-related travel restrictions for employees, a general lack of knowledge of other markets, and having sufficient funds for expansion (all 26% respectively).

Ronak Shah, CEO of QBE Insurance Singapore shared his perspective on the survey findings, noting the cautious attitudes of SMEs and how businesses can weather these challenges. “In the last 12 months, SMEs have been carefully adjusting their business strategies, prioritising prudence as they continue to work in a pandemic economy. As many continue to err on the side of caution in 2022, we encourage them to take this time to reassess their business models and operations to give mind to environment-based investments or initiatives that will help provide sustainable business growth post-pandemic.”

An optimistic but guarded outlook on the economy

Singapore SMEs displayed a general optimism for economic recovery  – nearly two-thirds (59%) of all respondents anticipates business outlook to improve in the coming 12 months. 67% of SMEs expects the economic climate to improve, and 33% expects the size of their businesses to grow in the next 12 months, up from just under one-fifth (19%) last year.

The survey also found that 61% of SMEs felt that pandemic policies, restrictions and lockdowns will worsen in the next 12 months, in addition to experiencing higher operational costs. 44% of all SMEs cited operating costs as their top concern in the last 12 months, with almost half (48%) of small-sized SMEs cited this as a top concern as well. The second and third largest concerns (31% and 26% respectively) were cost mitigation for business continuity due to the pandemic and operating with reduced cashflows, which are concerns that will likely continue to demand attention from SMEs in the next 12 months.

Greater focus on employee engagement and sustainability initiatives

Remote and hybrid working has become commonplace for the majority of SMEs in the past year. More than half (51%) of SMEs expect to continue this practice in 2022. An increasingly flexible work environment has also seen a greater emphasis on employee-oriented initiatives and decision making. In fact, 41% of Environmental, Social and Governance (ESG)-led business initiatives over the past year were centred around employee welfare and compensation. In addition, over half (54%) of all SMEs shared they had prioritised measures pertaining to employee health, safety, and wellbeing along with an increased focus on issues such as achieving resource efficiency and working towards diversity and inclusion (23%) and human rights (17%) at the workplace.

The survey also saw 40% of SMEs investing in green products, technologies and infrastructure; 26% in climate change-related policies, and 29% in renewable energy usage.

However, even with more ESG-led and sustainable-oriented investments in the spotlight, the survey revealed they were still not a main priority by SMEs here, with only over one-third (35%) of them engaging in these in the past 12 months. Key barriers to conducting ESG-led initiatives were cited as both the extensive amount of time needed and costs involved (31% each).

With business longevity increasingly established as being strongly interlinked with mitigating climate change effects, Mr. Shah shared his thoughts on the need for businesses to recognise sustainability and ESG-oriented initiatives as necessary for long-term growth, noting that they should be prioritised for sustained growth in a post-pandemic world.