Risk Intelligent Boards and Intangible Assets

 Michael D. Moberly    January 5, 2012

I tend to frame business issues and transactions through a broad, albeit a single lens; the lens of risk.  This includes identifying the array of potential risks and then considering various (viable) strategies to effectively mitigate and/or manage those risks on behalf of a company.  

I also tend to focus on risks related to sustaining control, use, ownership, and monitoring value and materiality of company intangible assets and intellectual properties (IP) because intangibles are, by far, the most significant sources of company value, revenue, and growth potential.

Unfortunately today, in many enterprise risk management initiatives, there remain boards, c-suites and management teams that do not share or embrace either of those perspectives.  That’s because, in part, they bring their own views and experiences about risk to the boardroom which, I have found to occasionally be out-of-step with the expanding spectrum and asymmetric nature of today’s truly global business and transaction risks. 

When such a dismissive or ‘looking through a rearview mirror’ attitude prevails in boardrooms and c-suites it presents some formidable challenges for change absent persuasive re-orientation, the occurrence of a costly adverse (risk) event, or recognition of fiduciary responsibilities to do otherwise, that can prompt boards to…

  • find a common, current, and forward looking context in which to frame and build a strategic consensus for understanding how best to approach today’s business risks and prioritize – mitigate those risks on behalf of the company
  • initiate action to design an objective and measurable framework to benchmark risks that is not overly weighted to subjective anecdotal experiences.

Another consequence of ‘risk dismissiveness’ in boardrooms is that real and emerging risks are less likely to be recognized particularly in terms of constituting necessary or routine discussion – action items on (board) agendas. 

To this point, a 2008 Deloitte report titled ‘The Risk Intelligent Board’ suggested that a significant percentage of board members conceive-address a company’s risks…

  •  solely at an intuitive level, or by relying (sometimes exclusively) on perspectives expressed by internal risk managers or a risk management committee
  • in relatively narrow contexts that limits their (risk) identification, prevention, and mitigation focus to tangible (physical) assets, not intangible assets where a majority of a company’s value and sources of revenue and growth potential actually lie.

 While the Deloitte report quite courteously suggests there is nothing especially wrong with the above perspectives, they do represent the proverbial ‘half a loaf’ approach in my view.  Broadly speaking, the identification, oversight, and management of a company’s risks:

  • should originate in boardrooms
  • include a full spectrum of risks associated with near and long term business transactions, processes, and strategies, and
  • absolutely must include a company’s intangible assets. 

As boards, c-suites, and management teams elevate risk to being a routine point of inquiry and action, emerging, as well as persistent risks will be consistently exposed and addressed and ultimately work in a company’s favor by diminishing the tendency to manage risk as subjective, anecdotal, or isolated (one-off) events.

It remains an economic fact that 65+% of most company’s value, sources of revenue, and building blocks for growth and sustainability actually lie in – directly evolve from intangible (not physical-tangible) assets.  That said, it’s difficult to appreciate why some boards are not more attuned to their company’s intangibles, seek the necessary orientation, or otherwise secure the expertise to actually become Deloitte’s version of a ’risk intelligent board’!

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or [email protected]

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