Michael D. Moberly January 6, 2010
Generally, I tend to frame business issues and transactions through a broad, but nevertheless, single lens; the lense of risk. This includes mulling over strategies to mitigate and/or manage those risks, particularly, in my case, risks related to sustaining control, use, ownership, and monitoring value and materiality of a company’s intangible assets and intellectual property (IP).
Though, in many enterprise risk management equations today, there remain boards that do not share or embrace those perspectives, in part because they bring their own views and experiences about risk to the boardroom which, in my judgment, may be out-of-step with the expanding spectrum of asymetric risks that routinely confront businesses today. When this occurs in boardrooms, it makes it difficult, absent effective-high level training, for boards to…
1. find a common context to frame and build a strategic concensus for understanding, approaching, and prioritizing risk on behalf of the company
2. design an objective and quantitative framework to benchmark against, i.e., one that does not rely on situation specific and/or subjective anecdotes.
Also, another possible consequence is that ‘risk’ will not become a necessary and routine (action-discussion) item on board agendas. In fact, a 2008 Deloitte report titled ‘The Risk Intelligent Board’ suggested that a significant percentage of board members conceive-address company risk…
1. solely at an intuitive level
2. by relying (sometimes exclusively) on perspectives expressed by internal risk specialists in combination with a boards’ own risk management committee, and/or
3. in a narrow manner by focusing on protecting – mitigating risks that can adversely affect company value through existing and presumably, tangible (physical) assets.
While the Deloitte report courteously suggests there is nothing especially wrong with the above perspectives, they do represent the proverbial ‘half a loaf’ approach. Done correctly, the stewardship, oversight, and management of a company’s risks, at the board level, should include addressing risks in a manner that is aligned with achieving long term strategies.
Too, by regularly inquiring about – addressing risk in the boardroom, a persistent problem will be confronted and likely diminish, e.g., the tendency for risk management activities to take place in subjective, anecdotal, and isolated silos.
Respectfully, it’s difficult to appreciate why some boards are not attuned to seeking the necessary training to become Deloitte’s version of ‘risk intelligent boards’, especially in light of the economic fact that 65+% of most company’s value, sources of revenue, and foundations for future wealth creation and sustainability lie in – directly evolve from intangible (not physical-tangible) assets!