Small and medium-sized enterprises (SMEs) in Hong Kong and Singapore are facing increasing operational costs, evolving cyber threats, and the growing influence of artificial intelligence (AI) in their business operations, according to the latest QBE SME surveys.
Conducted between late 2024 and early 2025, the studies gathered insights from 600 SME decision-makers in each market, examining economic sentiment, risk exposure, and insurance trends.
Financial pressures have intensified for SMEs in both markets. In Hong Kong – recently ranked as the world’s 10th largest exporter of merchandise – 60% of respondents reported higher costs and declining profitability, compared to 40% last year.
In Singapore, the situation appears more pronounced, with 66% citing cost increases, up from 50% a year ago. Access to funding and cash flow management remain key concerns, with approximately half of SMEs in both markets struggling with these financial issues.
The overall business outlook has also weakened. In Hong Kong, 64% of SMEs anticipate an improvement in economic conditions this year, down from 70% last year.
In Singapore, only 52% hold an optimistic view, compared to 60% previously. Inflation, regulatory changes, and rising operating expenses – such as Singapore’s goods and services tax (GST) increase – are among the key factors shaping this sentiment.
Revenue expectations have also declined. In Hong Kong, 65% of SMEs predict stronger sales this year, down from 70% in 2024, while in Singapore, the proportion of businesses expecting improved sales has dropped from 62% to 55%.
Andex Fung (pictured left), head of SME segment, Asia, at QBE, said SMEs are taking proactive steps to adjust despite ongoing challenges.
“Three-quarters of Hong Kong SMEs have taken cost control measures, while 45% of respondents have streamlined their operations, and 42% have diversified their offerings. We believe these actions underscore the ability of local businesses to respond and adapt,” he said.
AI is playing a growing role in SME operations, with adoption rates rising in both Hong Kong and Singapore.
In Hong Kong, 57% of SMEs reported using AI, up slightly from 55% a year ago. In Singapore, 52% of businesses indicated that AI is significantly impacting productivity, up from 49% in the previous year. However, a majority of SMEs in both cities do not expect AI to replace jobs within their companies in the near future.
Despite increased AI usage, concerns over its risks have grown. In Hong Kong, 47% of SMEs view AI as a potential business threat, up from 31% last year. The top concerns cited include privacy risks (69%) and cybersecurity vulnerabilities (52%).
In Singapore, apprehension over AI replacing jobs has surged, with 68% of respondents expressing concern, compared to only 17% in 2024. Privacy-related worries have also become more prominent, with 66% of SMEs citing data security risks, a sharp increase from 10% a year earlier.
Cyber threats remain a growing concern, with businesses in both Hong Kong and Singapore experiencing an increase in security incidents. In Hong Kong, 33% of SMEs reported a cyber event in the past year, up from 30%. In Singapore, this figure rose from 25% to 27%.
Despite heightened awareness, some businesses are reducing their cybersecurity investments. In Hong Kong, fewer SMEs are deploying security software (60%, down from 62%), conducting employee cybersecurity training (43%, down from 45%), or engaging external cyber resilience consultants (36%, down from 42%). In Singapore, cyber insurance adoption has declined from 38% to 36%.
However, in Hong Kong, more SMEs are hiring dedicated cybersecurity personnel, with 49% reporting staff in this area, up from 43%. Cyber insurance uptake also increased, rising from 39% to 43%. In Singapore, although coverage rates have declined, 51% of SMEs without cyber insurance said they would consider purchasing a policy, compared to 63% in Hong Kong.
“While local SMEs are aware of their knowledge gap on cyber risks, they are still not compelled to purchase insurance, on the basis of cost control,” said Shun Quan Goh (pictured right), head of underwriting, retail & SME at QBE Singapore.
He added that insurers can support SMEs by providing practical risk management solutions tailored to their needs.
The survey also indicated a shift in how SMEs approach insurance purchases, with a renewed preference for offline channels. In Hong Kong, 68% of SMEs now prefer in-person interactions when buying insurance, up from 57% last year. In Singapore, offline purchasing remains the dominant preference at 65%, similar to last year’s 66%.
The use of brokers and banks for insurance transactions has increased in Hong Kong, while reliance on online aggregators and direct digital platforms has declined. In Singapore, broker usage fell slightly (from 16% to 13%), while online-direct purchases increased (from 18% to 22%).
Most SMEs in both cities favour bundled insurance policies that cover multiple business risks. In Hong Kong, 85% of respondents prefer a comprehensive package, while in Singapore, 73% express the same preference.
