Emerging Cyber Risk Trends for SMBs in 2025: What You Need to Know

Small and medium-sized businesses (SMBs) are facing an increasingly dangerous cyber threat landscape in 2025. While major corporate breaches make headlines, SMBs have become prime targets for cybercriminals, and the consequences can be devastating. Recent research, including the Verizon Data Breach Report analyzing over 22,000 security incidents, reveals important trends that business owners need to understand to protect their organizations. Here's what you need to know to protect your business. 

Ransomware: The Persistent Threat

The Reality of Ransomware Attacks

Ransomware continues to be a financial nightmare for businesses of all sizes. Ransomware incidents jumped approximately 25% in 2024, with data exfiltration (theft of sensitive data before encryption) nearly doubling in frequency. Even more concerning, 82% of ransomware attacks affected companies with under 1,000 employees, making SMBs prime targets.

The ecosystem is growing more sophisticated, with approximately 80 active ransomware groups operating globally and 16 new ones emerging since January 2025. These attackers operate in specialized groups: those who create ransomware, those who license it, and "access brokers" who obtain credentials to infiltrate organizations.

The SMB Gap

While Fortune 500 companies often make headlines when breached, the reality is that there are only 500 of them compared to approximately 34 million small to mid-sized businesses (SMBs) in the United States. This vast number of potential targets creates an attractive landscape for cybercriminals.

According to recent studies, 82% of ransomware attacks affected companies with under 1,000 employees.

Many small business owners maintain the dangerous misconception that "it won't happen to us." This complacency is dangerous—1 in 3 SMBs suffered a cyberattack in the past year, and 32% say just one day of downtime (or approximately $10,000 in losses) could shut them down. Yet only 17% of small businesses carry cyber insurance, leaving a huge protection gap.

Protection Essentials

• Maintain multiple forms of data backup (offline, offsite, and cloud-based)
• Conduct regular practice drills for data restoration
• Enforce multi-factor authentication (MFA) for all accounts
• Develop and regularly test an incident response plan
• Consider cyber insurance – the average incident response cost for an SMB is approximately $325,000 before downtime or liability costs

Business Email Compromise: AI-Enhanced Threats

The Reality of BEC Threats

Business Email Compromise (BEC) scams, a form of social engineering, are surging in sophistication. The FBI Internet Crime Complaint Center reported $2.9 billion in BEC losses—a figure that's likely significantly underreported. Global BEC losses rose approximately 9% in 2023, and small business employees face 350% more social engineering attacks than staff at larger firms.

The emergence of artificial intelligence has intensified these attacks by enabling cybercriminals to:

• Reach more potential victims at scale
• Create more convincing impersonations
• Craft well-written messages without grammatical errors
• Build detailed profiles on targets using aggregated data

The SMB Gap

Smaller companies often assume only big corporations get scammed, and they lack strict verification controls. Most SMBs rely on undertrained staff for security and have no process to catch a fake invoice or an impostor call. This makes them vulnerable – the FBI reports BEC has amassed $55 billion in global losses over the past decade.

Small business employees actually face 350% more social engineering attacks than staff at larger firms

Protection Essentials

• Cultivate a security-aware culture
• Train employees to spot phishing and verify fund/data requests
• Implement multi-person approval for payments
• Run regular phishing tests
• Establish code words for verifying sensitive requests
• Extend your cyber insurance with social engineering fraud coverage

Supply Chain & Third-Party Vulnerabilities

The Reality of Supply Chain Vulnerabilities

The Verizon Data Breach Report revealed that third-party involvement in breaches has doubled from 15% to 30% in the past year. Nearly 45% of organizations expect significant supply-chain cyber attacks by 2025. Even cloud services pose risks: a 75% spike in cloud intrusions was observed in 2023, mostly due to weak credentials and misconfigurations.

The interconnectedness that creates business efficiency also creates security challenges. The 2023 Change Healthcare ransomware attack, where parent company UnitedHealth paid a $22 million ransom, exemplifies this risk. The breach created a cascading effect across thousands of healthcare organizations dependent on Change Healthcare's services.

The SMB Gap

Small businesses often assume vendors and cloud hosts "have it covered" and may not vet their security. Yet one in four SMBs doesn't even understand their own cyber risk profile, let alone assess third-party exposures, leading to blind spots in preparedness. While larger companies frequently assess the security posture of their business patterns, SMBs may not always have the resources to do so. A partner’s breach can quickly become their breach. 

Protection Essentials

• Extend your security perimeter to include vendors
• Perform due diligence on suppliers' cybersecurity
• Insist on contracts with breach notification and security standards
• Diversify critical providers where possible
• Ensure your cyber insurance covers incidents originating at vendors or cloud providers

Data Breach Aftermath: Legal and Financial Storm

The Reality of Data Breaches

Data breaches remain at all-time highs in both frequency and cost. The average breach cost hit $4.88 million (USD) in 2024 – a 10% increase. Even "smaller" breaches can trigger lawsuits or regulatory fines, especially with new privacy laws tightening obligations. Worse, stolen data is fueling future attacks: the exploitation of leaked data increased eightfold last year, with approximately 5.5 billion accounts compromised in 2024.

The SMB Gap

Many SMBs underestimate their exposure, assuming they don't have data worth stealing or that privacy regulations only hit big firms. 

In truth, 87% of small businesses hold customer or employee data that attackers would find valuable. 

A single breach can snowball into lost customer trust, mandatory notification costs, regulatory scrutiny, and even class-action lawsuits. Yet 64% of SMBs aren't even familiar with cyber insurance options.

Protection Essentials

• Treat data protection and privacy compliance as mission-critical
• Use encryption and access controls to safeguard sensitive data
• Monitor for intrusions so breaches can be caught early
• Have an incident response plan that includes notification procedures
• Transfer financial risk through cyber insurance that covers breach response and liability

Remote Work & IoT: The Expanding Attack Surface

The Reality of Remote Work and Internet of Things (IoT) Threats

The shift to remote work and proliferation of IoT devices have widened SMB attack surfaces. Home offices and personal devices often lack enterprise-grade protections, so a single compromised remote laptop or Wi-Fi can become a foothold for hackers. In fact, 14% of SMBs still don't use multi-factor authentication and 18% skip critical software updates – gaps that ransomware and botnets readily exploit.

Cybersecurity experts often take precautions that may seem extreme, such as avoiding public WiFi entirely in favor of personal mobile hotspots and steering clear of airport or public charging stations. These measures reflect the real risks present in our interconnected world.

The SMB Gap

Smaller firms often underestimate the risks introduced by remote workers and connected devices. It's common not to have formal BYOD (bring-your-own-device) or IoT security policies. 

22% of SMBs have no mobile device security policy at all. 

Basic security practices like changing default device passwords, using VPNs, or enforcing MFA for remote logins are inconsistently followed.

Protection Essentials

• Enforce MFA for all remote access and require VPN use
• Implement device management for employee laptops/phones
• Segment IoT devices on their own network
• Establish clear policies for remote work security
• Meet insurer security standards like MFA and patch management

AI-Driven Threats: The Evolving Landscape

The Reality of AI-Driven Threats

Cyber adversaries are weaponizing artificial intelligence to amplify their attacks. "Cybercrime-as-a-Service" now offers AI-assisted hacking tools, lowering the skill and effort needed to launch attacks. AI can supercharge phishing campaigns, vulnerability discovery, and malware coding.

In a recent case, an employee in Hong Kong was tricked into approving a $28 million wire transfer during what appeared to be a legitimate video conference with colleagues—all AI-generated fakes. 

The quality and convincingness of these technologies will only improve over time.

The SMB Gap

Most small and mid-sized businesses are not prepared for this AI-fueled threat landscape. They often lack advanced detection capabilities – only 18% of SMBs use proactive security measures like penetration testing or dark web monitoring. A global survey found 87% of executives (across company sizes) feel their cyber protections are inadequate. 

74% of SMBs manage cybersecurity in-house with non-specialist staff.

These companies face a growing deficit against AI-augmented cyberattacks.

Protection Essentials

• Leverage AI for defense to even the odds
• Consider AI-driven security tools for threat detection and network monitoring
• Implement family/team code words for verifying sensitive requests
• Invest in cybersecurity training or partner with managed security providers
• Ensure your cyber insurance keeps pace with evolving threats

Building a Resilient Security Posture

Cybersecurity threats continue to evolve rapidly, requiring businesses to stay informed and implement appropriate protections. While the threat landscape may seem overwhelming, a strategic approach can significantly reduce risks:

1. Implement basic security practices like strong password management
2. Train employees to recognize and report suspicious activities
3. Develop and regularly test an incident response plan
4. Secure a comprehensive cyber insurance policy that covers modern threats
5. Create a systematic approach to vendor security management
6. Stay informed about emerging threats relevant to your industry

Setting up Google Alerts for cybersecurity topics relevant to your industry can help you stay informed about emerging threats without requiring extensive research time. This awareness, combined with regular communication with your insurance broker about evolving risks, forms the foundation of an effective cybersecurity strategy.

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Concerned about your cyber liability coverage? Contact a Flow Specialty broker today to help assess your needs. 

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Frequently Asked Questions (FAQ): Small Business Cyber Threats

Are small businesses really targets for cybercriminals?

Absolutely. According to the Verizon Data Breach Report, small businesses make up a significant portion of cyber attack victims. Another showed that 82% of ransomware affects companies with under 1,000 employees, with small and medium-sized businesses experiencing a 46% rise in ransomware incidents and a 47% jump in losses.

What are the most common ways organizations get compromised?

According to the Verizon Report, credential abuse (using stolen or weak passwords) is the number one factor in compromises. Basic security practices like using strong, unique passwords and multifactor authentication can significantly reduce this risk.

How can my business protect against ransomware?

The best approach includes multiple forms of data backup (offline, offsite, and cloud-based), regular practice drills for data restoration, implementing multifactor authentication (MFA), and creating documented incident response plans that are regularly tested.

What should I look for in a cyber insurance policy?

Look for policies that cover both social engineering attacks and electronic funds transfer fraud. Also, ensure coverage for dependent business interruption that extends beyond IT-related vendors to any business service provider you depend on. Access to specialized attorneys and cybersecurity resources is another valuable policy feature. Have qustions about your coverage? Contact a Flow Specialty broker.

How can my business manage supply chain security risks?

Conduct thorough due diligence before engaging vendors, require minimum security standards for all partners, implement periodic security reviews of third parties, and ensure your cyber insurance includes dependent business interruption coverage.

How can we protect against AI-enabled fraud like deepfakes?

Establish code words or phrases within your organization that would be required for approving sensitive transactions or requests. Implement verification procedures that go beyond visual or voice recognition, and train employees to be skeptical of urgent, unusual requests, even when they appear to come from leadership.

What basic steps can our small business take immediately to improve security?

Implement a password manager to ensure strong, unique passwords; enable multifactor authentication on all accounts; create and test data backups; develop an incident response plan; and provide regular security awareness training for all employees.

How can I stay informed about evolving cyber threats?

Set up Google Alerts for cybersecurity topics relevant to your industry, work with a knowledgeable insurance broker at Flow Specialty who specializes in cyber risk, and consider investing in basic security awareness training for your team.

Based on research from Munich Re's Cyber Insurance Risks & Trends 2025, Verizon Data Breach Report, and industry insights from Cyber Insurance News, StrongDM, Chubb and SentinelOne.