Intangible Asset Value, The Key To Mitigating Risk…

Intangible asset safeguards for businesses should be constructed to… withstand Category 3 hurricanes or Richter Scale 4 earthquakes which act in concert with keystroke speed organization resilience.

An often effective and nuanced starting point for achieving this desired level of sustainability, resilience, and safeguards, in my judgment, is…consistent alertness to relevant anecdotal reports – accountings that provide glimpses into new techniques, methodologies, and perhaps most important of all, the players.

However, to ensure that intangible asset safeguard policies and practices effectively address and mitigate specific and growing numbers of challenges and risks…I urge business leadership (designees) become well versed in current and objective findings of social science research.  Too me, doing anything less can be construed as neglect and reckless.

But, perhaps worse, being unreceptive or unwilling to…integrate relevant research (findings) in an enterprise-wide intangible asset safeguard program can…

  • be uncannily apparent to economic and competitive advantage adversaries, be they insiders or global entities.
  • serve as a global beacon, of sorts, to economic – competitive advantage adversaries that vulnerabilities ‘in this business’ exist, which
  • subjects them to be targeted, have their assets breached and compromised,
  • with a high probability of success.

The above, very real scenarios, convey the level of sophistication… which many (economic – competitive advantage) adversaries have already achieved and regularly hone to stay well ahead of their respective, all be it, illegal curve!

Business leaders who elect, for whatever reason, to construe the characterizations above as…mere over-dramatizations, would not only be mistaken, but, doing so, also likely suggests they are not current regarding the…

  • business operational risks posed by increasingly (ultra) sophisticated and organized groups of state sponsored, independent actors, and a host of legacy free global (economic – competitive advantage) adversaries,
  • each functioning quite effectively, efficiently, and lucratively in the increasingly predatorial, aggressive,, and winner–take-all global business transaction environment.

Integral to achieving this defensible level of intangible asset protection is understanding that today…

  • 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, future wealth creation, competitiveness, and sustainability lie in – evolve directly from an array of intangible assets,
  • most of which are outgrowths of internally developed intellectual, structural, and relationship capital and intellectual properties.

In far too many instances, however, I observe intangible asset safeguard practices – programs which have obviously been devised – implemented using the framework of conventional  ‘infosec’ (ala information security)…

  • designed to address subjective, anecdotal, or one-off types of (information asset) risks, and/or
  • whose design emanates from pre-conceived, and likely outmoded perspectives of who the adversaries’ are, their origins, motives, methods of operation, and beneficiaries – recipients – end users, or
  • that are adversary (country) specific.

So, in these instances, what the initiatives (as conveyed above) often don’t do, or, do poorly, is…distinguish and focus information asset safeguard resources on specific and/or bundles of intangible assets which…

  • collaboratively elevate company or project value by delivering sources of revenue, competitive advantage, market position, reputation, and
  • serve as ‘building blocks’ for (company) growth, future wealth creation, and sustainability.

For the foreseeable future, intangible assets are, I am confident, the focal points (targets) of global economic – competitive advantage adversaries and economic espionage.  Why?, because it’s the intellectual, relationship, and structural capital (know how) adversaries seek and need!

Business leadership, boards, and investors, including CSO’s, CIPO’s, CTO’s, CRO’s, and CFO’s would be well served by acknowledging the above, i.e.,

  • distinguish a company’s key intangible assets relative to where value, sources of revenue, competitive advantages, and sustainability lie.

This begins by distinguishing – assessing those key intangible assets relative to their…

  1. Objective value the assets deliver relative to being directly linked to business operations and continuity, i.e., legal, financial, etc., and
  2. Subjective value the assets deliver, i.e., that which flows from the nature and/or context of the assets, i.e., customer lists, pricing lists, relationship capital, strategic planning, new product launches, etc.

Equally essential to constructing effective intangible asset safeguards, is recognizing that intangibles…are now, more than anytime previous time in business governance history, routine components (underliers) to any-all business initiatives, transactions, R&D, and new product launches.

Business risk realities dictate then…knowing precisely which (how, when, and what circumstances) particular intangible assets possess – produce the greatest value, revenue, and competitive advantage.  It is that which will be on economic – competitive advantage adversary’s ‘shopping list’.

For these reasons, I recommend…intangible asset safeguard measures be framed around these key principles…

  • the immediacy and criticality of adverse (economic, market, competitive advantage) impacts when specific risks materialize and potentially cascade throughout an enterprise.

Integral to this principle…is business leadership recognizing key methodologies for valuing intangible assets, i.e., based on their…

  • Fair Market Value – the price which property (ala intangible-information assets) would exchange hands between a willing buyer and a willing seller with neither being under any compulsion to buy or sell and with both having reasonable knowledge of the relevant facts regarding the assets.
    • However – in instances in which an insider acquires and sells information assets to an information broker, business intelligence operative, competitor, or foreign agent without knowing the ultimate end user, ‘fair market value’ is merely a euphemism for the highest price.
  • Value-in-Exchange – Considers the actions of buyers, sellers, and/or investors. It implies the value at which, in this instance, intangible (information-based) assets would sell (legitimately) if offered – became available on a piecemeal or compartmentalized basis.
    • However – proprietary information, trade secrets, or other forms of intellectual property sought and illegally acquired by an insider are likely to have multiple and/or standalone elements of value, i.e., a formula, plus the process to operationalize that formula.
  • Value-in-Use – The value of a unit of proprietary information and/or trade secret that produces on-going contributory value to an enterprise.
    • However – the information asset that is sought and acquired is integral to a company’s business operations and is necessary to sustain company value, sources of revenue, market share, competitive advantages, reputation, etc., i.e., Coca-Cola syrup recipe.

Michael D. Moberly [email protected] St. Louis October 10, 2012 the ‘Business Intangible Asset Blog’ since May 2006, 650+ posts, ‘where intangible assets, business, and solutions converge’.

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