Archive for December, 2011

Intangible Asset ‘Risk of Risks’: Company Reputation

December 30th, 2011. Published under Looking Forward, Organizational resilience and business continuity/conti, Reputation risk.. No Comments.

Michael D. Moberly      December 30, 2011

Company reputation is an intangible asset of the first order and, when effectively used and safeguarded, can be a major source of competitive advantage and sustainability.   This is probably what prompted The Economist’s Intelligence Unit to produce a ‘global risk briefing’ titled Reputation: Risk of Risks arising from interviews with 269 senior risk managers. Aside from the fact that the report was produced in December, 2005, its relevance remains very much intact today.

Company reputation is certainly a prized, yet increasingly vulnerable and fragile asset in my view which the reports’ respondents agreed by stating that reputation represented a main concern for the majority of risk managers, ahead of, for example:

  • regulatory risk
  • human capital risk
  • IT network risk
  • market risk, and
  • credit risk. 

Interestingly, the priorities of senior risk managers have changed little since publication of The Economist’s report.  It’s certainly fair to say then that company reputational risk also has become a very significant (fiduciary) concern, not just for senior risk managers, but for company management teams, c-suites, and boards as well.  They recognize the many ways it can adversely affect their company.

Company reputation is defined (in the Economists’ report) as ‘how a business is perceived by stakeholders, including customers, investors, regulators, the media, and the wider public’.  Company reputation, the report goes on to state, ‘declines when experiences of an organization fall short of expectations’. 

However, before this definition can be fully translated into effective (reputation risk) countermeasures, it’s important for a company to bring operational clarity to:

  • whose experience
  • what experience, and
  • which expectations.

Safeguarding a company’s reputation is, with few exceptions, probably the most important, but also, in my view, one of the more challenging tasks and (fiduciary) responsibilities a company can and should undertake relative to its overall management, stewardship and oversight.  In large part I find it challenging because of the asymmetric nature how (reputational) risks and threats can materialize and cascade throughout a company. 

For example, The Economists’ study identified three significant phenomena that individually and/or collectively contribute to elevating reputation risk, each of which remains relevant today:

  • development of 24/7 global media and communication channels
  • increased scrutiny from regulators, and
  • reduced customer loyalty

A relevant, but not easily answered question though, about damages a company can sustain as a result of a materialized reputational risk, in terms of prevention, mitigation, or management, is whether reputation risks – threats should be characterized and addressed as:

  • standalones, or
  • the consequence of other, perhaps simultaneously converging risks? 

As already noted above, reputational risk is often (highly) asymmetric in my view.  This belief inclines me to address it not solely as a standalone or separate risk, rather a consequence (by-product or multiplier) of risks that can materialize sequentially and adversely affect a company simultaneously on multiple levels.

Respondents to the Economist’ study identified the three biggest risks/threats to a company’s reputation as:

  • failure to comply with regulatory or legal obligation
  • failure to deliver minimum standards of service and product quality to customers
  • exposure of unethical practices

This elevates the importance of how company management teams, boards, and risk managers perceive reputational risks to their company…relative to the processes, procedures, and/or programs they (may/may not) have in place as forward looking monitoring and assessments of internal and external factors/variables necessary to prevent, mitigate, and manage reputational risks if/when they begin to materialize.

For example, when conducting a comprehensive (intangible asset) assessment of a company (which includes reputational risks) and there’s evidence that a company’s plans and/or attitudes for responding to reputational risks appear more closely aligned with crisis management than contingency and organizational resilience planning, I would engage the senior risk manager for clarity.  If its revealed that the company genuinely addresses reputational risks/threats solely through a conventional ‘crisis management’ lens, its often an indicator, that the company may not be adequately monitoring – scanning their horizon and stakeholders for risks/threats which is so essential today, and is, my judgment a key underlier to quality contingency – organization resilience planning, not crisis management!

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Franchise Systems: Sustaining Brand Integrity, Authenticity, Value, and Reputation Is Not Solely A Legal Function!

December 29th, 2011. Published under Franchise, Intangible asset strategy, Reputation risk.. No Comments.

Michael D. Moberly     December 29, 2011

A franchises’ brand and reputation are the driving forces that clients, stakeholders, and consumers recognize in the marketplace!  The intent here is to encourage franchisors to adopt a slight, but increasingly necessary shift in their business operating perspective from being solely market and margin driven, to being more protective of the intangible assets that drive those margins.

Examples of franchise system’s intangible assets include intellectual property, i.e., patents, trademarks, competitive advantages, trade secrets, brand, and reputation, etc., all of which are embedded in their products and/or services.

More specifically,  franchise safeguards and risk prevention/management initiatives should address each of the franchise’s unique and/or proprietary processes, designs, and business practices; achievable through consistent monitoring and oversight to ensure product – service integrity, authenticity, consumer confidence, and shareholder value are being sustained.

In some respects, franchise systems, at least in my view, have more at stake insofar as safeguarding and managing risks to their intangible assets than merely an obligation or fiduciary responsibility to…

  • identify each of their intangible assets, i.e., intellectual property, proprietary competitive advantages, and trade secrets. etc.
  • identify and assess the level of risk that exists in their market space globally to those assets and the attendant products and services.
  • put in place effective practices to mitigate those risks necessary to sustain control, use, ownership, and value of the franchise systems key proprietary assets.

Here are eight rules…

1.  Brand integrity and reputation involves more than mere legal protections and the presumed deterrents afforded through conventional intellectual property rights…

2.  If a franchises’ product-service (brand, reputation, etc.) has value and produces competitive advantages, be assured there are adversaries globally that will appropriate those assets, pay no royalties, and take the profits for their efforts…

3.  If franchisors and franchisees do not take proactive steps to safeguard their most valuable intangible assets contributing to the products and services they deliver, no one else will…

4.  If a franchisor waits to develop and execute a brand integrity program after one or more of its products/services (a.) have been misappropriated, (b.) its value eroded, and/or (c.) reputation (consumer confidence) diminished, it’s virtually certain the franchisor will lose and the adversary will gain…

5.  If a franchisor executes effective and consistent practices to safeguard and monitor its brand, authenticity, value, intellectual property, competitive advantages, reputation, and aggressively pursue misappropriators,  it’s likely would-be adversary’s will target competitors, not you…

6.  If a franchisor permits ‘different prices in different markets’ (for its products, services), be assured, someone already has, and will continue to ‘steal your profits’…

7.  A franchisors’ own products/services, in the form of gray market goods and counterfeits, are often its biggest, most active, and consistent competitor

8.  The safeguards and risk management initiatives designed to sustain control, use, ownership, and value for each product/service that a franchise delivers (owns) etc., is as important, as the promotional costs – resources used to market it!

Patents and Patent Value: The Importance Of Due Diligence

December 28th, 2011. Published under Business Transactions, CFO's, Intangible asset protection. No Comments.

Michael D. Moberly   December 28, 2011

Let’s start again with this economic fact, 65+% of most company’s value, sources of revenue, and building blocks for growth lie in – directly evolve from intangible assets and intellectual properties!  It’s certainly rational then to presume that in a significant percentage of business transactions, e.g., mergers, acquisitions, and even venture capital investments, intangible assets and IP will be in play and very much part of a deal.

In that regard, transaction due diligence should be ‘laser focused’ to achieve two key objectives:

  1. identify, unravel, and assess the status, stability, fragility, and sustainability of the targeted IP and other intangible assets, and
  2. ensure control, use, ownership, and value of those assets are sustainable and monitorable in both pre and post transaction contexts.

Patents can obviously be significant sources of competitive advantage, value, and potent (defensive – offensive) weapons to be leveraged in the marketplace which makes monitoring their status, sustainability, and value essential elements in due diligence with a strong bearing on a transactions’ success. 

However, patents are widely presumed, sometimes naively so, to be the strongest form of intellectual property protection available, because of their (presumed) deterrent value insofar as affording their owners (or, licensees) the legal standing to exclude all others from making, using, selling, offering for sale, or importing the claimed subject matter for a period of years. 

But, there are realities that are often times overlooked or dismissed regarding the deterrent value of issued patents that seldom surface in conventional, snap-shots-in-time, one-size-fits-all due diligence processes.  That is, today, all forms of intellectual property are vulnerable to compromise, theft, misappropriation, counterfeiting, infringement, and competitive advantage undermining (value erosion) from an acutely competitive, highly predatorial, and winner-take-all global business environment.  The risks and vulnerabilities to any company’s intellectual property and intangible assets today are persistent and asymmetric.

So, in my judgment, relying one of the several formulas for calculating the (current, future) value of a targets’ IP and other intangibles must include a big ‘it depends’.  That is, patent value depends on the comprehensiveness and experience of a transactions’ due diligence team which must include monitoring the targeted assets pre and post transaction!

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Insider Threats and Risks To Proprietary Information, Trades Secrets, IP and Data Security

December 26th, 2011. Published under Insider Theft of IP and Intangible Assets, Insider Threats. No Comments.

Michael D. Moberly   December 26, 2011

This is directed to the ever-growing number of management teams and boards who recognize their expanding fiduciary responsibilities to stay abreast of well-grounded research to better manage and mitigate the rising number and variants of insider risks/threats to company’s proprietary information and data security.

As employee allegiance and loyalty become more nebulous more challenges will surely lie ahead for companies to sustain control, use, ownership, and value of their intangible assets, IP, trade secrets, and proprietary/sensitive information.  Below are highlights of relevant, timely, and forward looking studies conducted by DoD’s Personnel Security Research Center.

For those unfamiliar with PERSEREC (Personnel Security Research Center), it is a relatively small, non-descript arm of the Department of Defense headquartered in Monterrey, California that houses an extraordinary group of researchers dedicated to conducting a broad range of, often times, collaborative research, on matters related to personnel security.  While the products are primarily directed to DoD and various entities within the U.S. intelligence community, I find most of their research has many applications to the private sector.

In a relatively recent report produced by PERSEREC titled ‘Allegiance in a Time of Globalization’ (Defense Personnel Security Research Center, Technical Report 08-10, December, 2008) Katherine Herbig provides much needed, in my judgment, insights, perspectives, and facts regarding the single concept of ‘employee allegiance’.

One reason I am interested in Herbigs’ research on employee allegiance is that I facilitated two focus groups of highly experienced information/data security practitioners.  The group’s collective mission was to serve as a reality check for a prototype of an insider risk audit tool being developed by PERSEREC.

‘Given the current context of globalization,’ Herbig suggests, ‘questions about how to assess, investigate, and adjudicate employee allegiance are of increasing concern’. While Herbig suggests these ‘concerns’ are relevant to the personnel security community and counterintelligence agencies, I might also add those same concerns have relevance to the private sector particularly insofar as protecting – preserving information-based intangible assets, proprietary/sensitive information, intellectual property, and trade secrets.

But, as Herbig points out, employee allegiance is increasingly difficult to assess in the context of globalization.  One challenge Herbig points out is that ‘since 1990, more countries are offering dual citizenship to individuals who immigrate and naturalize elsewhere, all the while, trying to bind those same citizens to their countries of origin’.

Such practices have, in turn, allowed larger numbers of people to ‘collect dual or multiple citizenships’, which, according to Herbig (and, I agree) serve to dilute the conventional meanings attached to of citizenship and allegiance’

It’s not necessarily a quantum leap then to project even more complex challenges will surely lie ahead in terms of companies being able to consistently and effectively safeguard their intangible assets, trade secrets, sensitive/proprietary information and intellectual property rights in business transactions where those assets are in play.  This takes on, in my view, even greater significance when considered in light of the economic fact that today, 65+% of most company’s value, sources of revenue, and building blocks for growth and sustainability lie in – evolve directly linked from intangible assets and IP not tangible (physical) assets.

When Herbig’s work is examined in parallel with the findings of another PERSEREC study (below) it conveys even more challenges that lie ahead insofar as companies being able to consistently safeguard their sensitive information, i.e.,

  • Growing numbers of employees have/retain emotional, ethnic, and financial ties to other countries fostered by technologies that allow global communication that serve to sustain those ties, one product of which is less inclination to seek U.S. citizenship…
  • Fewer employees are deterred by a traditional sense of (employer) loyalty. More inclination to view theft of information assets (espionage) to be morally justifiable if sharing those assets will benefit the world community or prevent armed conflict…
  • Greater inclination for employees engaged in multinational trade/transactions to regard unauthorized transfer of information assets or technology as (a.) a business matter rather than (b.) an act of betrayal or treason…
  • Growing allegiance to the/a global community, i.e., increasing acceptance of global as well as national values. Tendency to view human society as an evolving system of ethnically and ideologically diverse and interdependent people making illicit acts easier to rationalize…

The inspiration for the above was sparked by (1.) ‘Allegiance in a Time of Globalization’ (Defense Personnel Security Research Center, Technical Report 08-10, December, 2008)  and (2.) ‘Technological, Social, and Economic Trends That Are Increasing U.S. Vulnerability To Insider Espionage’ Defense Personnel Security Research Center Lisa A. Kramer, Richards J. Heuer, Jr., Kent S. Crawford Technical Report 05-10 May, 2005 International Journal of Intelligence and Counterintelligence as ‘America’s Increased Vulnerability to Insider Espionage’ (20: 50-64, 2007)

Intangible Assets As Business Differentiators!

December 23rd, 2011. Published under CFO's, Intangible asset strategy, Intangible Asset Value, Intangibles as strategic assets. No Comments.

 Michael D. Moberly    December 23, 2011

Business differentiators; the obvious ones can readily roll off the tongue of even the most mediocre sales person.  But frequently those differentiators are merely the most visible and only scratch the surface of a company’s embedded competitive advantages, or more correctly, its intangible assets. 

I encourage management teams to dig deeper and cast a broader net that encompasses an entire enterprise in order to truly reveal and unravel the often unrecognized and frequently taken-for-granted, but nevertheless increasingly valuable intangible assets that consistently serve as a company’s differentiators.

It’s no longer sufficient for management teams to merely recite the proverbial ‘elevator pitch’ that espouses a company’s product compared to a competitor or that their company’s advertising, marketing, and service is superior.

What really differentiates businesses, products, or inventions of one company from its competitors today lies in such practical features as brand, reputation, image, and goodwill, of which each is a standalone intangible asset (commodity).

Equally important, the lens through which management teams identify and assess their company’s intangible assets should not be in the same context as if they’re assessing an American quarter horse in a pre-race paddock relative to the mostly subjective prospects for that horse’s success in short quarter mile sprints. 

Rather, the management team’s lens should be adjusted to consider a different set of characteristics (intangible assets), i.e., one’s that are developed (bred) for endurance and stamina (sustainability, stability) to compete successfully in longer races and for a longer racing (revenue producing) career.  In other words, the stability and sustainability of a company’s intangible assets are important indicators, insofar as their near and long term potential to consistently deliver ‘differentiators’,  i.e., value, revenue, and serve as building blocks for growth and future wealth creation.

Today’s absolute necessity for company management teams to know and understand how to position, leverage, and extract value, and otherwise monetize intangible assets lies in the economic fact that 65+% of most company’s value, sources of revenue, and future wealth creation evolve directly from intangible assets and IP. 

Since intangible assets have such significant value and play such an integral – contributory role in a company’s standing and potential success, practices must be in place to sustain their control, use, ownership, and monitor their value and materiality!

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Risk Assessment and Due Diligence For Venture Capital Investments

December 22nd, 2011. Published under Due Diligence and Risk Assessments, Intangible asset assessments/audits.. 2 Comments.

 Michael D. Moberly    December 22, 2011

It is not uncommon for 75% to 90+% of start-up – early stage firms’ value, projected sources of revenue, and ‘building blocks’ for growth lie in – are directly linked to the invention’s IP and intangible assets. 

We’ve come to know that investments in early stage companies and/or university spin-off’s, VC’s will require, quite correctly, putting in place management teams with experienced and strong (intangible asset and intellectual property) oversight, stewardship, and licensing credentials.    

Among other essential responsibilities, the management team and the inventor absolutely must ensure that control, use, ownership and value and materiality of the invested IP and intangible assets is being monitored.  Unfortunately, many merely rely on  patent issuances as being a sufficient stand alone deterrent to infringement.

The path to achieving that essential objective commences with the genuine recognition that a well-designed and thorough (IP, intangible asset) assessment and due diligence process must be conducted to provide investors (VC’s) with current and objective pre/post transaction insights and perspectives about the fragility, stability, defensibility, and marketability of the invested assets.  The assessment – due diligence findings will serve as a foundation for facilitating (consummating) a more secure, profitable, and sustainable transaction.

Investors need and want relevant, insightful, objective, and forward looking (over-the-horizon) perspectives that extend well beyond the conventional ’snap-shot-in-time’ assessment – due diligence that does not take into account – address asset volatility or the ever growing possibility that the invested assets have already been compromised in some manner.

 Thus, the intangible asset – IP assessment and due diligence must, among other things…

  • identify any embedded, under-the-radar risks, vulnerabilities, and operational – usage complexities that can impair and/or entangle the assets and become preludes to costly and time consuming legal disputes or challenges.
  • unravel the invention’s development and identify any additional clusters of value and potentially revenue producing (intangible) assets and competitive advantages, aside from the registered IP and beyond what was espoused in the inventor’s initial pitch.
  • determine if asset safeguards and (asset) value preservation and monitoring measures were in place and aligned with (a.) the investors’ objective, (b.) the company’s strategic business plan, and (c.) the functional (life, value) cycle of the invested assets, and of course  (d.) the all important exit strategy.

If an assessment-due diligence reveals that any of the key assets are suspect, impaired, or may have already been compromised, the investment transaction may warrant reconsideration or inclusion of specific (risk mitigation – transfer) covenants before going forward.  Under such circumstances, it’s unlikely that a management team alone, regardless of their experience and skill, can effectively manipulate the assets to overcome or reverse such transgressions without requiring costly, time consuming, and possibly momentum stifling legal action.

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Risk Intelligent Company Culture: A Valuable Intangible Asset To Achieve

December 21st, 2011. Published under CFO's, Company culture and reputation., Enterprise risk management.. No Comments.

Michael D. Moberly     December 21, 2011

A first, and a very important step toward developing a ’risk intelligent company culture’ is recognizing that risk is not solely an external phenomena, i.e., all risk does not emanate from outside a company. 

A second, and equally important step in developing a risk intelligent company culture comes from recognizing that company value can be favorably affected by integrating certain aspects of risk management with human resource management.  The rationale for doing this lie’s in the reality that a significant percentage of (company) risk evolves from – is embedded in various employee behaviors and actions, including management teams and boards.

 In other words, according to Deloitte’s, The People Side Of Risk Intelligence: Aligning Talent And Risk Management, risk touches virtually every aspect of employee (HR) management, and employees touch virtually every aspect of risk management.   

A risk intelligent company, Deloitte’s report points out, executes at the point in which there is convergence of…

1. Risk Governance – how a company treats (identifies, assesses) risk and assumes responsibility for risk oversight and strategic decision making in a dynamic and global risk environment.

2.  Risk Infrastructure Management – how a company assumes responsibility for and understands how to design, implement, oversee, and sustain an effective risk management program.

3. Risk Ownership – how and when employees assume some degree of ownership (responsibility) for identifying, assessing, monitoring, reporting, and mitigating risk.

In light of the economic fact that U.S. businesses lose an estimated 7% of their annual revenue to various forms of occupational fraud, a risk intelligent workforce can be a valuable and useful intangible asset for any company.  One does not have to look far to see the range of adverse (long term) consequences on companies when they rely on poorly designed or executed risk management policies, practices.

In a risk intelligent company (culture), management teams and boards assume a fiduciary obligation to…

  • understand the adverse consequences of unattended risks
  • how existing risk management policies are being interpreted and practiced internally by employees

A starting point for achieving a risk intelligent company culture is to critically assess unwritten (risk management) practices by posing the following questions:

  • do all employees, including the management team and board, understand the companies risk management priorities, objectives, and the strategic reasons-rationales behind them?
  • what (employee) behaviors are actually being rewarded with respect to identifying and mitigating risk
  • are company (employee) incentives aligned with the company’s risk management priorities and objectives

Recognizing each question’s relevance insofar as how it can serve to influence and/or perpetuate a company environment of unmanaged risk taking is a necessary step to becoming more intelligent (and objective) about company risk.  Too, it’s a prelude to creating a risk intelligent company culture wherein management teams, boards, and employees collectively assume responsibility for cultivating company-wide awareness about risks.

To do so  fosters risk intelligent behaviors at all levels which begins by…

  • adopting a common definition of risk that specifically reflects the nuances of company operations
  • clearly defining the roles, responsibilities, and authority (for managing risk) coupled with relevant levels of (enterprise wide) transparency.

 Lastly, and perhaps most importantly, it’s important to recognize two realities insofar as developing a ‘risk intelligent company culture’…

  1. any change in (company) culture generally precedes changes in employee behavior
  2. cultural and behavioral changes are less a product of formal risk policies, controls, and pronouncements, than they are the result of effective (employee) incentives and rewards.

(This post was inspired by a paper produced by Deloitte titled ‘The People Side Of Risk Intelligence: Aligning Talent And Risk Management and respectfully adapted by Michael D. Moberly)

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Intangible Asset Focused Company Culture…

December 20th, 2011. Published under Board oversight, CFO's, Intangible asset focused company culture.. No Comments.

Michael D. Moberly    December 20, 2011

 It’s good practice now for company management teams and boards to make a commitment to laying the necessary foundation for the development of a company culture that consistently extracts value and competitive advantages from the intangible assets it produces or acquires.

The single biggest business reason for doing this is that rising percentages (65+%) of most company’s value, sources of revenue, and ‘building blocks’ for growth lie in  – are directly linked to intangible assets!

Irrespective of the broad global acceptance of this business – economic reality, there remains resistance from some management teams and boards about the necessity to acquire the necessary skills and undertake the fiduciary responsibilities to profitably exploit and effectively safeguard the intangible assets.

Anecdotally, five reasons often cited by management teams and board for expressing skepticism or being dismissive about intangibles assets include…

  • a genuine lack of familiarity what intangible assets really are
  • their lack of a conventional sense of physicality or ‘tangibleness’ and thus are portrayed as being difficult to quantify and/or measure insofar as determining their contributory value and performance
  • they don’t appear separately on balance sheets or financial statements, instead are lumped together into indistinguishable bundles of goodwill
  • they tend to fall outside of Peter Druckers’ time honored ‘mba’ precept, i.e., if they can’t be measured, they can’t be managed
  • they require outside-the-mainstream strategies to extract value, drive/sustain competitive advantages,  monetize, or used as collateral.

During most client engagements, one of my objectives is to devote a portion of time to identifying the principles and benefits of building a resilient and profitable intangible asset focused company culture.

My interest in building – advancing company cultures, particularly one devoted to intangible assets evolves from the superior work done by Dr. Edgar Schein in building productive and sustaining company cultures.  Dr. Schein points out that a company culture begins with ‘shared assumptions that employee’s learn while solving (internal) problems’. 

Standing alone, Dr. Schein’s perspective may appear, for the yet to be convinced, more suitable for a university lecture hall than the increasingly aggressive and competitive real world of globally operating companies and business transactions.  But, when management teams factor 65+% of (their) company’s value and sources of revenue evolve from intangibles, even the most reticent should correctly conclude that devoting even the most minimal time and resources to building an intangible asset conscious company culture would be an exercise that will deliver favorable and long lasting outcomes.

But, how would management teams know there was a payoff to a fully functioning (intangible asset) company culture?  Again, referring to Dr. Schein’s work it would become evident at the point in  makes perfectly prudent business sense to assume that a significant percentage of the challenges and problems companies face relative to stagnation are variously related to their reluctance or inability to effectively identify, assess, and extract value and competitive advantages from their intangible assets.

So, what’s a bottom line to building a company (enterprise wide) culture that recognizes, produces, measures and sustains control, use, ownership, and monitors the value and materiality of its intangible assets?  It’s a shared and well-linked set of characteristics, beliefs, assumptions, and behaviors that intangible assets…

  • are real, credible, and convertible sources of value, potential revenue, and ‘building blocks’ for growth and sustainability
  • should guide – underlie business decisions, transactions, and strategic planning!

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Boards, Senior Executives and Business Unit Management Teams: Measuring A Company’s Real Health!

December 19th, 2011. Published under Analysis and commentary, Board oversight, CFO's. No Comments.

Michael D. Moberly     December 19, 2011

In 2004, Deloitte teamed with the Economist Intelligence Unit to conduct a survey titled; In the Dark: What Boards and Executives Don’t Know About The Health Of Their Businesses.

The survey produced three key findings that demonstrate the importance boards and senior managers should now be attaching to tracking/monitoring non-financial aspects of company performance, i.e., intangible assets.

1. Factors driving boards and senior managers to monitor key non-financial performance indicators are:

    a. increasing global competition

    b. growing customer influences

    c. greater awareness of risks to company reputation, and

    d. accelerating product innovation

2.  Despite the growing need to monitor non-financial vital signs of their businesses, most boards and senior managers are struggling to do so.

3.  The biggest obstacles to enabling boards and senior management to effectively track/monitor non-financial vital signs of their business are:

    a. lack of sophisticated, broadly accepted measures, and

    b. doubts that they truly matter.

Interestingly, the Deloitte – Economist Intelligence Unit survey also revealed that an overwhelming majority of respondents (ranging from 90+% to 78%) described the following as ‘critical and important drivers to (their company’s) success’, i.e.,

  • customer satisfaction
  • service quality
  • efficiency and effectiveness of business processes
  • brand strength
  • innovation, and
  • quality of relationships with external stakeholders

(Please note that each driver above is routinely categorized as an intangible asset!)

In my view, the findings and obstacles cited above by the respondent’s to the survey can be substantially mitigated by elevating boards’ and senior executives’ awareness, alertness, and overall (operational) familiarity with intangible assets, particularly the one’s I often refer to as ‘company specific intangibles’, i.e., distinctive intangibles a company has produced internally or acquired that provide (measurable) competitive advantages, increased market share, or adds to a company’s overall value.

Once this occurs, I’m confident it will become much clearer to boards, senior executives and business unit management teams alike:

  • what type of performance indicators need to be in place to consistently track/monitor their company’s non-financial vital signs, i.e., it’s health
  • any changes in company governance that may be necessary, i.e., stewardship, oversight, management of the intangibles to better utilize – leverage those performance indicators!

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Understanding Intangible Assets Leads To Better Business Decisions…

December 16th, 2011. Published under Business Applications, Business Transactions, CFO's, Company culture and reputation., Fiduciary Responsibility. No Comments.

 Michael D. Moberly    December 16, 2011

Without dispute, it’s an economic fact that today 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth lie in – directly evolve from intangible assets! 

But, it’s no longer sufficient for management teams to merely know what intangible assets are or which one’s their company produces and possesses or follow the conventional accounting path of lumping them altogether (indistinguishable) as goodwill.  It’s now essential, if not a fiduciary responsibility to:

  • sustain control, use, and ownership of the assets
  • know precisely how the (intangible) assets contribute to a company’s value, revenue, and sustainability
  • understand how to leverage-position the assets to extract as much value and competitive advantage as possible
  • exercise effective stewardship, oversight, and management of the assets and consistently monitor their value and materiality.

 By achieving this level of operational and financial familiarity with a company’s intangible assets, numerous and enterprise wide multipliers can follow, for example:

1.      Add predictability to business transactions when intangible assets and IP are in play by being able to assess the stability, fragility, defensibility, and sustainability of the assets (due diligence). 

 2.      Elevate probability that projected returns will be achieved, competitive advantages will be sustained, asset synergies/efficiencies will occur, and exit strategies affirmed.

 3.      Achieve effective convergence of accounting, reporting, and asset valuation by recognizing the linkages to:

           a.  knowledge management programs

          b.  intellectual property development and enforcement

         c.  Sarbanes-Oxley and FASB compliance

          d.  utilizing the balanced scorecard.

 4.      Reduce probability of costly, time consuming, and momentum stifling legal challenges and disputes regarding the assets by foreseeing circumstances that can ensnare and/or entangle (intangible) assets to impede, erode, or undermine a transaction’s value, competitive advantages, or projected performance. 

 5.       Build an ‘intangible asset’ company culture that contributes to:

            a.  recognizing, producing, and sustaining control, use, ownership, and value of intangibles

           b.  providing the necessary awareness to accelerate the pursuit of asset rights issues, i.e., ownership, value, infringement,  misappropriation, theft, etc.

 6.      Develop a comprehensive organizational resilience (continuity-contingency) plan that encompasses all forms/contexts of intangible assets in order to produce a stronger and quicker recovery following a significant business disruption or natural disaster.

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com