How Middle Market Companies Can Bridge the Gap Between Risk Awareness and Management

The events of the past year have challenged middle market companies in unprecedented ways. From the COVID-19 pandemic that swept the globe to a record-shattering Atlantic hurricane season and more, a myriad of triggers forced these companies to adapt in the face of disruption and re-evaluate how they conduct business.  

As data from Chubb and the National Center for the Middle Market (NCMM) reveals, middle market companies began to show signs of optimism toward the end of 2020. Confidence in the U.S. and global economies rose 10% and 11% above Q2 levels, respectively. Some middle market companies even found opportunity amid the pandemic: Of those considering international expansion, nearly a third (30%) say COVID-19 has introduced new opportunities to do business in international markets, and some middle market companies believe COVID-19 has increased the likelihood of restructuring (30%), a transformative acquisition (20%) and merging with another business (19%).

That said, the past year has not been without risk. As a result of COVID-19, nearly two-thirds of middle market companies were forced to make extreme or significant changes to their workspaces. In fact, at the end of 2020, 28% of middle market companies were still in the process of a phased return to their workspaces, and another 19% were waiting to return at all until there was a breakthrough in vaccines/treatments. Notably, facilities that have been vacant for long periods of time may present safety and property risks, such as those posed by unused boilers, dormant sprinkler systems, unseen fire hazards and more. For tips on reopening safely following a shutdown, visit “6 Steps to Prepare Your Business Facility for Reopening.”

The pandemic heightened other risks, as well. For example, 43% of middle market companies believe COVID-19 will have a negative impact on their supply chains in the coming year. That said, COVID-19 is not middle market companies’ only concern, nor should it be. When it comes to the importance of managing risks, 72% of middle market companies say managing pandemic risk is extremely/very important, along with other risks including but not limited to:

  • Legal, regulatory or compliance risk: 54%
  • Competitive risk: 54%
  • Supply chain risk: 49%
  • Non-cyber catastrophic incidents (natural disasters, operational problems): 46%
  • Change in leadership or control (CEO succession, M&A): 43%

Despite acknowledging these exposures, middle market companies may not be adequately prepared to manage them. For example, while nearly half (49%) of middle market companies say managing supply chain risk is very or extremely important, only 38% feel completely/very prepared to respond to a government shutdown, and an even smaller percentage (28%) are completely/very prepared to respond to civil unrest—two triggers that can lead to supply chain disruption. Middle market companies are also underprepared when it comes to property risk, as less than half say they are completely/very prepared to respond to prolonged power outages (47%) and physical damage from water or fire (47%).

When it comes to bridging the gap between their awareness of and ability to manage risks, middle market companies must remember that they don’t have to work alone. Only 20% of middle market companies rely heavily on an insurance agent or broker to understand and manage risk. Aside from leaving agents’ and brokers’ valuable risk management experience and expertise on the table, this means that middle market companies are also missing out on agents’ and brokers’ knowledge of the insurance landscape.

Each company has unique needs, and agents and brokers can help clients identify the carrier whose insurance coverage solutions and risk management tools best suit them. For example, Chubb offers a wealth of resources to help clients better understand their exposures and mitigate risks before an incident even occurs—from the Business Income Consultation tool, which can help clients better understand the insurance coverage they may need to survive disruption, to Chubb’s actionable tips for staying protected from water damage, hurricanes, wildfires and other exposures.

As middle market companies reflect on lessons learned over the past year and prepare for what’s to come, they should ensure that they’re not only taking stock of the risks they face, but also taking action to manage them. By working together with independent insurance agents and brokers, middle market companies can help make sure they are as protected as possible, no matter what the future may bring.

Ben Rockwell is Division President, Chubb Middle Market.

The opinions and positions expressed are the authors’ own and not those of Chubb. The information and/ or data provided herein is for informational purposes only and is not a substitute for professional advice. Insurance coverage is subject to the language of the policies as issued.