Systemic Risks To Intellectual Property and Intangible Assets Held By SME’s and SMM’s

Michael D. Moberly   October 28, 2009

The risks (threats) to the intellectual property and intangible assets held by SME’s (small, medium enterprises) and SMM’s (small, medium multinationals) are quickly rising to systemic levels!

Those systemic risks (threats) lie largely with ‘insiders’ along with the proliferation of extraordinarily sophisticated and predatorial data mining, information brokering, infringement, misappropriation, and counterfeiting operations that function profitably on a global scale.  The risks (threats) presented by these entities and the subsequent asset compromises that occur are persistent, assymetric, and frequently devastating to small company’s profitability, competitive advantages, and reputation, etc.  Multiple respected studies consistently report that U.S. company’ losses of IP (largely attributed to insiders, infringement, theft, and misappropriation, etc.) range from $45 to $200+ billion annually.

True enough, the adverse affects/consequences of those IP – intangible asset losses/compromises incurred by U.S. SME’s and SMM’s, may not rise to the same ‘systemic level’ as experienced by AIG, Lehman, or Bank of America, etc., but, they do carry adverse cascading (systemic) affects that are often equally devastating in the SME and/or SMM arenas. (as noted in a previous post) defines systemic risk as the probability of loss common to all businesses, and inherent in all dealings, in other words, risk that cannot be circumvented or completely eliminated.  If SME’s or SMM’s wish to expand, grow, and prosper it will be necessary and perhaps inevitable, at some point, for some or all of their IP and intangible assets to be part of a (business) transaction, and therefore, in play and therefore, at risk.

Systemic risk then, is the vulnerability, probability, and criticality associated with loss, theft, misappropriation, infringement, compromise, and/or leakage of IP (know how, trade secrets) which can constitute, for SME’s and SMM’s the equivilent of ‘market shocks’ which, in turn, produce adverse ‘cascading’ affects throughout an enterprise and its alliance partners, suppliers, and service providers as well.

Of course, those adverse affects are comparable to the systemic risks experienced by the financial services industry recently, i.e., defaults, bankruptcies, employee layoffs, loss of markets and market share, and competitive advantages, which unlike the bailed out and/or merged financial services sector firms, is generally irreversable and unrecoverable for SME’s and SMM’s. 



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