Why Businesses Get Their Intangible Asset Risks Wrong!

Some companies and their management teams do not appear inclined to distinguish risk, particularly to their intangible assets…for them, risk is risk, is risk, is risk!

Today however, in light of the economic fact…that 80+% of most company’s value, sources or revenue, competitive advantage, and sustainability lie in – directly emerge from intangible assets, for me, is an indicator that the conventional notion of business specific risk tolerance is shallow and awkward at best.

In circumstances which I am familiar…often there are multiple, series, or sequences of variables – factors in play which affect how, when, where, and why certain risks (to intangible assets) may materialize, or be subject to mitigation, i.e., probability, vulnerability, and criticality. Serious minded professionals and practitioners recognize each risk warrants unraveling and examining.

To be sure, some risks merely ‘come with the territory’…i.e., where and with whom certain types of transactions, projects, of initiatives occur.  Also, there are particular business risks (to valuable intangible assets) which are less evident, i.e.,  stealthy, and may only materialize upon the timely command of a legacy free economic – competitive advantage adversary.

Of course, there are (fiduciary) obligations to recognize risk, how it materializes, and when – where its impact will be felt…that is, most risk, is seldom, if ever, a static (one time, non-repetitive) phenomenon.

Instead, business – intangible asset risks are increasingly asymmetric…in terms of dimension and how, when, where, and the various circumstances they originate, materialize, and their ability to rapidly cascade throughout an enterprise producing adverse impacts to all intangible assets in play.

It really matters how risk to intangible assets are perceived, characterized, and calculated…my client engagement experiences lead me to believe that a not inconsequential percentage of business management teams, when asked about how risk is perceived, characterized, and calculated to their company’s intangible assets, not infrequently, it exemplifies subjective guesstimates.

Subjective guesstimates can be variously useful…but usually only if-when influenced by past-experience and/or anecdotal evidence derived-gathered from conversations with knowledgeable colleagues employed elsewhere.

Risk to valuable, revenue generating, and competitive advantage intangible assets need not be speculative…relative to if, when, where, how, i.e., the form risks may-will – can materialize and adversely affect a company.

Risk can be objectively measured…providing one acknowledges and has a modicum of appreciation for risk asymmetry, i.e., where, when, how, why, and who engages in causing – influencing risk to intangible assets and how additional risk can rapidly cascade throughout an enterprise.

Savvy business leaders are obliged to be operationally familiar with the various risks to their intangibles…and is not wholly delegable! Any business today, irrespective of sector, size, or revenues, framing risk to their intangible assets as speculative or individual one-off events suggests ineptness. Or similarly, what’s exhibited somewhat frequently is risk being characterized as merely ‘dodging one bullet at a time’.  Thus, once a ‘risk skirmish’ appears to subside, any presumption a business will be risk free for a period of time and able to return to operational normalcy  indeterminately, is folly.

Why do businesses often get their intangible asset risks wrong…I am not suggesting there is, as-yet, a single – best practice (process, procedure) for getting intangible asset risk right.

There is little doubt in my view, that achieving operational level familiarity with intangible assets…is the correct starting point. Based upon numerous client engagements, particularly with small, medium size businesses and research-based startups, respectfully, I make no presumption that the management team in place, or business founders and stakeholders I encounter, initially sense an obligation to seek consensus about risks to their most valuable assets, ala intangibles, and how to effectively thwart and/or mitigate those risks, in the context of, not if, rather when and how they will materialize.

Relevance of economic – competitive advantage adversary investigative research…experiences I have gleaned from numerous client engagements and many years of being engaged in economic – competitive advantage adversary research, allow me to conclude in today’s aggressively predatorial, go hard, go fast, go global, and winner-take all business development, execution, and transaction environments…

  • how management teams’ variously have fiduciary-level responsibilities to acknowledge risk(s) to their intangible assets.
  • which can materialize anytime, anyplace, anyhow, and, by anyone, and
  • which can adversely morph, embed, and cascade throughout a business affecting other types-categories of intangible assets, ala reputation, brand, image, goodwill, supply chains, etc.

Yes, timely awareness of risk materialization…and applying actions relevant to the intangible assets at risk, are keys to minimizing, if not thwarting, the inevitable adversities of materializing risk.

This post was adapted by Michael D. Moberly for application to ‘intangible asset risk’ from two fine books authored by Geoffrey Kabat respectively titled ‘Getting Risk Right: Understanding the Science of Elusive Health Risks’, Columbia University Press, New York, 2016 and ‘Hyping Health Risks: Environmental Hazards in Daily Life and the Science of Epidemiology’ (Columbia University Press 2008, reviewed in the July/August 2009 SI)

Michael D. Moberly September 6, 2017 [email protected]  St. Louis, the ‘Business Intangible Asset Blog’ since May 2006, 650+ published blog posts ‘where one’s attention span, businesses intangible assets, and solutions converge’!

Readers are invited to explore other published blog posts, video, books, and position papers at https://kpstrat.com/blog


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