Enterprise Risk Management to Mitigate Reputational Risks…

Michael D. Moberly – January 22, 2024 – Business Intangible Asset Strategy & Risk Mitigation – Founder, Business Intangible Asset Blog & kpstrat

This post describes a framework for businesses to proactively identify, execute, monitor, safeguard, and mitigate reputational risks,

  • via the principles, strategies, and practices associated with ERM (enterprise risk management.
  • applied to the present-day majority of businesses (across sectors) which are intangible asset intensive, dependent, and reliant.

Economically – operationally, this translates to 70 – 80+% of most business’s valuation, competitiveness, and revenue generation capability, etc., derive from developingapplying the right intangible assets, at the right time, in the right way, at the right cost. Intangibles | BrookingsUnseen Wealth: Report of the Brookings Task Force on Intangibles on JSTORIntangible Assets: Computers and Organizational Capital | Brookings

Intangible asset enterprise risk management (ERM) is a defined as a distinct set of practices and strategies to

  1. unravel, identify, define, explain, and instruct (enterprise-wide) risk tolerance positions for leaders and management.
  2. prepare for – take affirmative steps to safeguard and mitigate risks to business’s ‘mission essential’ intangible assets, enterprise wide.

Businesses ‘mission essential’ intangible assets are various forms, contexts, and applications of…

  • often unique and proprietarily developed intellectual, structural, relationship capital and IP.
  • which energize business reputation, standing, operating culture, revenue generation capability, valuation, and competitiveness.

These realities render ERM principles and practices particularly relevant and well-suited to…

  1. intangible asset intensive, dependent, and reliant businesses, products, services, brands, and reputation, by
  2. lending itself to identifying – differentiating business’s ‘mission essential’ intangible assets, and taking enterprise-wide initiatives to,
  3. safeguard, mitigate, and monitor risks that adversely affect reputation.

Readers are reminded that today, and for the foreseeable future, most businesses, irrespective of sector, size, sales, standing, stage of development, or location, are increasingly dependent, and reliant on…

  1. non-physical assets, that is, they are neither physical, fixed, or tangible, but are,
  2. often proprietarily developed and hold unique forms, contexts, and/or applications of knowledge, knowhow, processes, procedures, and/or associations,
  3. applied to differentiate – accentuate products, services, brands, and/or standing,
  4. provided same are treated as proprietary and embed in business operating culture.

Risks to businesses ‘mission essential’ intangible assets include array of circumstances, situations, events, and/or behaviors, etc., which can become vulnerabilities to-for shouters, shouts, shouting which create fear, uncertainty, and doubt.

The presence of FUD factors can lead to disproportionate undermining and/or devaluation of (business, brand, product, service, reputation) standing, competitiveness, valuation, revenue generation capability, and overall sustainability.

As readers know, the life cycles of businesses ‘mission essential’ intangible assets’ contribution to reputation, et al, can vary over time.

We are obliged to recognize however, that many-most of the contributory roles and value adds of ‘mission essential’ intangible assets can be indeterminate, providing, same are recognized and treated accordingly, i.e., safeguarded, monitored, and risks mitigated enterprise-wide.

We are obliged to consider that the primary means, motivations, and language associated with many ‘viral’ reputation risk and threat delivery…

  • are often accusatorily dramatic, asymmetric, and far reaching.
  • come with dedicated and often uncompromising followers and supporters.
  • can produce potential (enterprise wide) adverse effects that commence – cascade @ keystroke speeds.

Not recognizing – appreciating enterprise-wide adverse effects which can materialize at @ keystroke speeds, @ the will and timing of others, can deliver costly and dramatic challenges enterprise wide and less capability to return to state of operational normalcy with the mission essential intangible asset intact and not irreversibly tainted or doubted.

Therefore, we are obliged to acknowledge that conventional perspectives – practices of risk management tend to…

  1. be siloed by treating risk as being predictable knowns based on previous experiences and largely affecting tangible-physical-fixed assets and/or people-users-consumers.
  2. come with calculable generalizations relative to circumstance, location, incident type, and/or ‘risk taking’ and presumptions about specific precipitators – preludes to risk materialization. Risk Taking – Mistake Making Axioms… – kpstrat
  3. not include the asymmetric delivery and keystroke speed cascading effects of reputational risks which may start local, and rapidly become national (viral).
  4. leave conventional assessments – reactions to ‘reputation risk’ falling short, insofar as
    1. which, when, where, how, why, and who will-can initiate reputation risk, and
    2. vulnerability, probability, and criticality of reputation risk materialization as mere nebulous local – regional guesstimates.

The principles associated with ERM as advocated here, focus on safeguarding, mitigating risk to ‘mission essential’ intangible assets, which reputation is key, and apply same to good-better-best strategies – practices to defend, react, and respond.

It’s instructive to know that business – brand reputation is…

  • about perceptions, interpretations, and opinions, etc., of image, goodwill, trust, capabilities, and/or intentions related to a business, its leaders, and/or a product, service, and operating culture.
  • subject to public exposure, and therefore variously vulnerable to the motivations and opinions of nefarious shouts, shouting, and shouters. Business Reputation Risk Mitigation Is Essential… – kpstrat

We advocate ERM principles can converge in understandable and collective perspectives that a business’s individualized parts (i.e., components, divisions, departments’ missions, function, and contributions) are interconnected, interrelated, and intersect (must converge) to form the whole. The whole represents the principle of ERM.

Strategies to address business reputation risk reactions – responses are very important. In part because materialization can be rapidly – asymmetrically delivered with adverse effects to all parts of an enterprise.

Holding an enterprise-wide vision, understanding, and strategy ‘that treats’ the whole is a good thing which translates to a ‘risk intelligent’ strategy. (Michael D. Moberly) and What is Enterprise Risk Management (theirm.org)

Readers may consider the…

  • framework for enterprise risk management (ERM) proposed in 2004 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), a group of professional associations of U.S accountants and financial executives that issues guidelines for internal controls. Although the framework mentions virtually every other imaginable risk, it does not contain a single reference to reputational risk.)
  • Basel II international accord for regulating capital requirements for large international banks. In defining operational risk as “the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events,” the Basel II framework, issued in 2004 and updated in 2005, specifically excludes strategic and reputational risks. That’s mainly because of the difficulty of factoring them into capital-adequacy requirements, most banking-risk professionals would say.

Posts @ Business Intangible Asset Blog present various ‘risk realities’ that warrant attention of business leaders, entrepreneurs, R&D administrators, management teams, boards, and investors across sectors. Mitigating (reacting, responding to) the often ‘public – viral’ risks and challenges produced by reputational risks, are obligations with little room or time for equivocation or error.

The Business Intangible Asset Blog was created in 2006 and now includes 1100+ topic specific posts intended to provide readers, ala business leaders, management teams, R&D administrators, boards, and investors, etc., with reliable insights to the application, valuation, competitiveness, revenue generation, and sustainability contributions of intangible assets.

Posts at Business Intangible Asset Blog are intended to draw attention to the development, application, management, safeguards, and risk mitigation of business’s ‘mission essential’ intangible assets.

Readers are respectfully invited to explore other – similar posts, along with books, pamphlets, and papers available @ ‘Business Intangible Asset Blog’ and kpstrat.com.

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