Undersized squad flag rewards

That's what the choices you make in your Defensive setup does for you, it gives you the option to recover by putting in place a Defense that your opponent will struggle with or underestimate - If you choose to go completely experimental on both Offence & Defence then you are choosing to increase your risk of defeat while also gaining experience on those encounters and rolling the dice on potentially getting high banner wins with your experiments.
Part of the game is making good judgements on whether you can beat a particular enemy squad with the squad you are putting in against it, whether that is a full squad or an under-sized one, and people should be rewarded for getting that judgement call right and not for getting it wrong.

As an example in my current GAC matchup I thought I had a low chance of success so I went a bit more experimental on Defence in an attempt to keep slightly more options for Offence. I then made a misjudgement on one of the enemy squads and took 2 attempts to beat it...but one of my experimental defensive squads also took my opponent 2 attempts to beat and because my other battles were reasonably well judged and I'd saved 1 extra strong offensive squad I managed a 6-banner victory.
Some tactics, some judgement, some experiments, and of course some luck too - it's not all about the 1st time victory, it's about the overall approach you take and then sometimes relying on your Defence to help you out.