Michael D. Moberly June 30, 2017 firstname.lastname@example.org ‘A business intangible asset blog where attention span really matters’.
In my judgment, a not insignificant percentage of the business community and service providers, have become piously complacent insofar as assuming the terms risk management and risk mitigation are interchangeable. Through my lens, there are important distinctions with differences!
The terms risk management and/or managing risk, in my view, suggest these are actions taken to manage adverse events – circumstances which likely have already materialized., i.e., sort of managing risk ex post facto. Whereas, risk mitigation, assumes effective action will be taken to abate and minimize the probability that adverse effects of particular-risks known to emerge – coincide with specific actions and/or transactions in which IA’s will be – are in play.
I am suggesting there is a bright line that distinguishes managing adverse events-actions-behaviors which have already occurred vs. having specific policies, processes, and procedures in place to mitigate events-actions-behaviors before and/or at the earliest stage of their materialization. In other words, in advance of adversities manifesting to the level of business destabilization or lethality.
Of course, the strategic underlier to this argument is recognizing that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for future wealth creation and sustainability today lie in intangible, not tangible assets. This translates to rapid growth in the number of companies in every sector now operating with high levels of intangible asset intensity and dependency. Accordingly, far more risk mitigation – management initiatives and services should be focused on intangibles than tangibles.
As most risk mitigation – management professionals recognize all too well, a helpful prelude to executing either is for a relevant – comparable risk to materialize and adversely impact another company (preferably, a competitor) and produces…
• sudden and significant hemorrhaging of value, revenue, brand,
reputation, image, goodwill, and competitive advantages, etc.
• adverse public, political, and/or regulatory spillovers that lead to
long term hemorrhaging of market share, and erosion of customer-
client base, company value, and revenue generation capability.
It’s certainly not uncommon, when a significant business risk does materialize to adversely affect a company’s intangible assets, that previous c-suite unresponsiveness and/or expressions of indifference often give way to receptivity for substantive commitments to mitigate-manage business risk, preferably before they materialize.
Too, my experience notes, management team interest in risk will now likely include sustaining control, use, ownership, and value of the company’s intangible assets which are in the probable risk paths in the future, should they materialize.
Experience has also led me to conclude there are (generally) two key factors that influence how business risks will be received (interpreted, assessed) by c-suites, management teams, and boards and ultimately influence their propensity for action, e.g.,
• if the risks’ adverse outcomes are presented in objective-
quantitative contexts vs. subjective-qualitative contexts?
• if a risk is presented-characterized as being responsive to
prevention, mitigation, or management practices-techniques?
• if the risks, and their potential materialization are characterized
as single occurring, perhaps, one-off events, absent conveying
vulnerability-probability for multiple risks materializing
• if characterization of the risk includes potential for producing
enterprise-wide cascading affects that significantly elevate both the
cost and challenge to adversely affect business value and sources of
revenue, and stop competitive advantage hemorrhaging?
• if the risk advocate is inclined to over-dramatize vulnerability and
probability that certain risk will materialize, to the exclusion or
minimalization of criticality, i.e., near-long term adverse impacts.
As an intangible asset strategist and risk specialist, I seek consensus on matters of risk and try to avoid circumstances in which there are competing interpretations and assessments of particular- risks in terms of the company’s vulnerability to, the probability of, and a risks’ criticality to the company, should it materialize. An essential requisite to making a business risk presentation is to recognize that while management team and board may not be familiar with the intricacies of current business risks/threats, they typically grasp a ‘big picture’ and may have already framed certain perspectives about how best to address a risk, albeit from a managerial – financial position or an assumption regarding a company’s risk tolerance and/or risk threshold.