The Midlands outfit are lingering above the drop zone with just three points separating them from the bottom three.
"If we go down it will be a disaster for the whole club. But we know the situation we're in and it needs fixing," said Dunne.
"This season has to be a warning to everyone that we need the squad to grow, so that if there are injuries then we have experienced cover.
"It's very difficult in the Premier League because the sides who have been promoted recently are really good with strong squads."