The Biggest Challenges for SMEs, from Expansion to Innovation

At the beginning of the pandemic, many small and medium-sized enterprises (SMEs) were forced to halt operations due to social restrictions.

However, as the pandemic subsided, SMEs now face different challenges.

"Geopolitical tensions stemming from the Russian invasion of Ukraine, the energy crisis, hyperinflation, coupled with the demand for sustainable innovation, climate change, rapid technological advancements, and social shifts, all present new challenges," stated the World Economic Forum (WEF) in its November 2022 report, *Future Readiness of SMEs and Mid-Sized Companies*.

"All these challenges will persist for an unpredictable period and will continue to impact less resilient companies," it continued.

According to the WEF survey, the majority of SMEs globally feel their biggest challenge is maintaining operations and business expansion (67%).

Other major challenges include improving human resource quality (48%), strengthening company culture (34%), and utilizing technology and innovation (25%).

Some SMEs also face funding challenges (24%) and government policy challenges such as tax rates, interest rates, and so on (22%).

Generally, the WEF found that current global SME conditions are less resilient due to limited capital, infrastructure, and a lack of skilled labor.

However, SMEs are considered superior to large companies because they have direct communication channels between departments and their leadership.

"This allows them to react more effectively, faster, and more agilely in changing business strategies to better meet market needs," said the WEF.

"We encourage a broader ecosystem of policymakers, investors, and stakeholders to help increase the capacity of SMEs so they can thrive and have a positive impact on the economy and the environment," it added.

This survey was conducted by the WEF on 800 SMEs across various countries. The criteria for small businesses according to the WEF are companies with fewer than 49 employees and annual revenue below US$5 million.

Medium-sized businesses have between 50-250 employees and/or annual revenue below US$50 million.

The surveyed SMEs came from 21 business sectors, including financial services, education services, agriculture, construction, trade, and others.