Michael D. Moberly May 14, 2012
All too frequently the contributions’ intangible assets make to a company’s value and serve as sources of revenue are overlooked, neglected, or outright dismissed. Equally unfortunately, those attributes are often obscured by intangible assets’ (a.) lack of physicality, and (b.) not knowing precisely where and how intangibles ‘fit’ on balance sheets and financial statements, or even reported at all. Too, with equal frequency, the assets’ proprietary and competitive advantage features go unrecognized, un-protected, undervalued, or not valued at all.
I often characterize intangible assets to company management teams as being akin to the proverbial ‘hand in front of our face in a pitch dark room’. That is, they’re often developed internally, sometimes over time and embedded in a company’s routine operations, processes, and functions that, in many instances, fall under a management teams’ mba – tangible (physical) asset oriented radar. Just as frequently, company’s engage in HR functions and other types of business transactions in which the intangible asset components of either go unnoticed, unused, and seldom effectively exploited.
So, why, or how is it beneficial and necessary for company management teams, c-suites, and boards to acquire a familiarity with intangible assets now? And, how will such familiarity produce (translate as) multiplier effects and risk mitigators as the title of this post claims?
The key objectives are, of course, to position and exploit a company’s intangible assets in order to extract as much value and competitive advantage as possible throughout the assets’ value – functionality (life) cycle.
In my view, this occurs when management teams achieve two things:
- begin exercising consistent, effective, and sufficient stewardship, oversight, and management of their company’s intangible assets, as the basis for
- sustaining control, use, ownership, and monitoring the value and materiality of the assets
Other useful outcomes, i.e., risk mitigators and multipliers of effective and consistent (intangible) asset management include…
- Elevating transaction due diligence quality by (a.) recognizing how to rapidly identify, unravel, and safeguard valuable – revenue producing assets in (b.) both pre and post (transaction) contexts.
- Adding predictability to transaction outcomes by being able to recognize and assess asset (a.) stability, fragility, sustainability, and defensibility, and preferably mitigate risks, and (b.) relevance to achieving projected returns. competitive market position, anticipated synergies and efficiencies, and exit strategies.
- Reducing the probability intangible assets (and IP) will incur unnecessary risk, i.e., (a.) become entangled and/or ensnared in costly, time consuming, and momentum stifling legal challenges, (b.) that can erode and/or undermine asset value, performance, or competitive advantages.
- Providing a stronger foundation for aligning the utilization and exploitation of a company’s intangible assets with (a.) continuity-contingency plans, (b.) organizational resilience – risk management planning, and (c.) strategic business objectives.
- Contributing to building a ‘company culture that’is (a.) attuned to intangible assets, their value, and contributions to (company) sustainability and profitability, and (b.) treats intangible assets as business decisions, rather than solely legal or accounting processes.
- Strengthening the convergence of computer/IT security and intellectual property and intangible asset safeguards to achieve timelier awareness and pursuit of (IP) rights- ownership violations.
- Providing a foundation for more effective application of (a.) knowledge management initiatives, and (b.) balanced scorecard approaches.
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