Intangible Asset Risk Thresholds and Tolerances

May 6th, 2017. Published under Intangible asset risk tolerances and thresholds.. No Comments.

Michael D. Moberly May 6, 2017 ‘A intangible asset business blog where attention span really matters’.

Intangible asset (IA) risks that materialize will, in most instances, be cause for adjusting a businesses’ tolerances – thresholds for IA risk, irrespective of size, sector, maturity, and/or financial health.

Too, many businesses, whether acknowledged or not signal, in advance, their thresholds and tolerances for IA risk. This is especially relevant to risks that materialize near ‘keystroke speed’ ala social media, that produce adverse impacts to IA value, revenue, competitive advantage, sustainability, and equity.

Anecdotally, I find a significant variable lies in learning whether (how) business leaders conceive of their asset risk exposure (i.e., vulnerability, probability, criticality) in threshold and/or tolerance contexts. A company’s thresholds-tolerances for IA risk should seldom, if ever be executed in a one-size-fits-all context. That’s because IA materiality, value, revenue generation, competitive advantages produced, including the assets’ fragility, stability, defensibility, sustainability, and contributory values ratios fluctuate. Business-company leadership are obliged to assess – factor variables affecting risk to their IA’s, e.g.,

• speed of (risk) materialization and its expansion – embeddedness
throughout an enterprise.
• criticality of risk materialization to all or specific parts/units of
a company, its products and services.
• a company’s capabilities to and the speed which it recognizes and
mitigates (neutralizes) risk(s).
• a company’s overall resiliency, ala recuperative capabilities
relative to compromised, undermined, or lost IA’s vis-à-vis
customers, clients, consumers, and suppliers, etc.

Business leadership and management teams are obliged to factor IA risk tolerances – thresholds as being integral to structuring (undertaking, negotiating, and executing) any new business initiative, transaction, product-service rollout, or R&D, etc. Clearly, the manner-in-which companies – businesses approach, prepare for, and ultimately respond to (IA) risk potential and materialization, varies considerably.

To my recollection, I have been engaged in only a handful of conversations over the course of 25+ years in the IA arena, in which insurers and insureds were part, and the words ‘intangible assets’ were applied. I find in many instances, business-company leadership operationally unfamiliar with IA’s they have control, use, and ownership, equate or assume their threshold and/or tolerance for risk is magically reflected in the insurance plan and/or the insurer’s explanations. Obviously, there is far more attention paid to the cost -price of (risk insurance) premiums and the total dollar (value of) losses to physical-tangible assets than IA’s.

My experiences suggest that ‘risk’ remains largely oriented to tangible-physical assets, and as such, is likely to be-a-reflection of subjective, pre-determined (risk) thresholds and/or tolerances calculated by insurers and underwriters. These conventions are generally weighted toward the type, content, and (replace) value of an insureds’ physical-tangible products and services vs. the contributory role and value of IA’s.

There are indeed, numerous forward looking – thinking business leaders and management teams who recognize the absolute importance of anticipating and trying to mitigate IA-specific risk, which is what this book will focus. It is after all, an economic fact that 80+% of most company’s value, sources of revenue, and competitive advantage lie in – emerge directly from IA’s, so it’s prudent that risk thresholds and tolerances fully encompass relevant IA’s.

It is after all, the manner-in-which the company’s IA’s are integrated and applied to its products and/or services that individually or collectively elevate their value, competitiveness, and revenue generation capacity. Ironically, it is those same intangible features, characteristics, and inputs which find attractivity-appeal to global cadres of ultra-sophisticated economic and competitive advantage adversaries.

This leads to another (second) facet of IA risk management which is emerging with consistent frequency and is a consequence of a management team’s felt obligation and/or necessity to ‘get to the market space first’ with their innovation, product, or service. In other words, the go fast, go hard, go global phenomenon is itself a driver of risk to IA’s.

As always, comments are encouraged and most welcome.

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