How does growth affect your scaleup's risk profile?

A scaleup is a high-growth business – typically around its Series B phase. According to research by the ScaleUp Institute, the UK has over 30,000 scaleups, which collectively employ more than 3 million people and contribute more than £1.2 trillion in turnover to the UK economy.

And despite concerns about the UK’s energy crisis, the impact of Brexit, supply chain delays and geopolitical uncertainty, the overwhelming majority of scaling businesses expect to grow in 2023.

Having recently closed our own Series B funding round, Superscript knows a thing or two about scaling up, risk exposure and risk management. We know how fast-paced growth can affect a business’ risk profile, and we’re able to reflect on this experience to support our scaleup clients. Here are some of the things to look out for.

Common risks for scaleups

Cybersecurity

As a business grows, it can become a more attractive target for cyber attacks; more capital or data can lead some hackers to think the business can afford higher ransomware or extortion demands. Scaling businesses must ensure they have adequate security measures in place to protect sensitive data and prevent breaches.

Regulatory compliance

Scaling businesses, and especially those in the technology space, may be subject to a variety of laws and regulations, such as data privacy laws and intellectual property laws. As a business scales, it may need to comply with additional regulations, which can be costly and time-consuming – and if handled incorrectly, could lead to a fine or lawsuit.

Operations

Growing businesses often need to scale operations to meet increased demand. If not managed properly, this can create bottlenecks and issues with supply chain disruptions, production delays and quality control problems.

Competition

As a business grows, competition may become more fierce, and the company may need to adapt to changing market conditions and customer preferences. These distractions are often unwelcome and can potentially harm focus and negatively impact execution. Handled properly, however, competition can sharpen tools, processes and focus.

Finances

Scaling businesses may face financial risks such as cash flow problems, currency exchange risk and interest rate risk. Management of these finances and liquidity is a complicated and important job, and mismanagement can leave the business in trouble with shareholders and employees.

Reputation

Technology businesses rely heavily on their reputation and public perception. A negative incident or a large-scale data breach can cause irreparable damage to the company's reputation and brand image, which could fundamentally affect its income, customer and staff retention and ability to grow.

Talent retention

As a business scales, it may become more difficult to retain top talent. This can lead to a loss of institutional knowledge and a decrease in productivity. Let’s face it, attracting and retaining top talent is a top priority for almost every business, especially in less certain economic times.

Innovation

Tech scale-ups are often at the forefront of innovation and experimentation, but this comes with the risk that the company may invest in a technology or product that doesn't gain traction or doesn't meet expectations. If something isn’t working, then failing and learning quickly is vitally important. Having the confidence and conviction to make these bold decisions is an important leadership skill.

What cover does a scaling business need?

Business insurance – whether it be directors’ and officers’, cyber, professional indemnity or employers’ liability – plays an important role in protecting businesses from risks, while also ensuring that raised capital is spent on growing the business, rather than mitigating the risks mentioned above.

And working with an insurance company that understands scaleups can ensure that your insurance continues to protect your business as it grows.

Drawing on our unique view of the risks associated with growth, SuperscriptQ, our specialist advisory service, works closely with some of the UK and Europe’s most exciting scaling businesses to provide advice on changing risk profiles and finding the right insurance.

Interested in speaking to us? See how to get in touch with SuperscriptQ.