How can you use risk to make money in a pandemic? The answer is by understanding your intangible assets and seeing risk as a game-changing opportunity for real growth.
Covid-19 has posed many challenges to businesses. But for some companies it has accelerated the innovation cycle as they have been forced to pivot and adapt to changing market conditions, with innovation happening at speed.
When the Financial Times ranked the firms that had a net market capitalisation gain of more than USD$1Billion during the Covid-19 pandemic, most of those at the top had one thing in common: they were rich in intangible assets, says Michael Masterson, Managing Director – Australia & New Zealand – at global intangible asset specialists, Everedge.
He told the online audience at a webinar organised as part of the RIMS Australia 2020 Virtual Summit that the key to the remarkable success of companies like Amazon, Netflix and Disney was that they understood how to manage and mitigate the risk associated with these assets while still allowing innovation to thrive.
“Every single company starts with an idea,” he says. “You start off with negative revenue. You cannot take a greater risk than you do on day one, and then as time goes on that reduces as you bring in skilled people around you.
“But as that risk plateaux, if you don’t take new risks, your earnings will also plateaux as well… and that’s where you are disrupted.”
Key to the self-disruption that will keep a firm growing and expanding are the intangible assets that have grown in significance from an average of 17% of corporate value in 1975, to 87% today. “What we are talking about here are the things that allow you to drive market share ahead of anyone who is comparable with you,” says Masterson.
These are assets such as content, design, data and networks.
Of course, leveraging these assets brings with it risk, and key to managing this is distinguishing between what Masterson calls “DisRisk”, which restricts growth, costs money or is driven by compliance, and “EuRisk”, which is proactive, forward looking and generates growth.
The main DisRisks to consider are the leakage or theft of critical information, the hazardous use of open source code or software, whether or not a firm can prove its ownership of key assets and brands, and the threat of or actual IP litigation.
Most of these risks are below the radar for risk managers, who are focused instead on economic, reputation, financial and compliance risks.
In order to allow their firms to innovate, they must embrace a profound shift in perspective.
Ultimately, if you innovate where you have a strong intangible assets, you will grow – even in a pandemic, according to Masterson.
He says: “The harder you are to copy, the more market share you will have.”
RIMS Australasia 2020 Virtual Summit
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RIMS Australasia 2020 Virtual Summit: DAY TWO: 1. Driving Innovation through positive Risk