Do you know where your intangible risks lay? EverEdge’s managing director, Australia and New Zealand, Michael Masterson, gives you the hard facts in this easy 5 min read.
Intangible assets are the most important assets that companies own today, which means that they are also the primary source of risk for most companies. But, while these risks are significant, they are also in many cases entirely preventable with a bit of planning and foresight.
STEP ONE: IDENTIFY YOUR INTANGIBLE ASSETS
When it comes to mitigating risk around your intangible assets, the first step in this process is actually understanding what intangible assets you own. Intangible assets include data, brand, content, code, trade secrets, patents, trademarks and industrial know-how, internet assets, and plant variety rights. These are the primary drivers of a company’s competitive edge and financial performance and research has shown that companies that focus on intangible assets consistently outperform their peers and industry benchmarks.
It is vital that the Board and management teams take a leadership role in protecting and managing a company’s innovation, with the first steps being to identify:
1. What are our intangible assets?
2. What are the impact of these assets on our business and how are they driving economic benefit?
STEP TWO: IDENTIFY THE RISKS FACED
Once you understand what intangible assets you own and their value to your business, the next step is to understand what risks you are exposed to through these assets and how to mitigate them.
The top five intangible asset risks we see companies facing are:
1. The leakage or theft of confidential information
a. Companies today are constantly leaking key intangible assets, with the primary sources of those leaks being customers, suppliers or employees. According to research by Code 42 in its Data Exposure Report, 72 percent of CEOs, 71 percent of CMOs and 49 percent of business leaders admit to taking intangible assets with them from previous employers, when they move to a new organization. .
To mitigate this risk companies need to establish policies and procedures to protect their most valuable data from being accidentally or intentionally shared with third-parties.
2. Not being able to prove ownership of intangible assets
a. 8 out of 10 companies cannot prove they actually own their intangible assets.
To mitigate this risk companies need to ensure that they keep an inventory of their intangible assets, along with establishing and registering ownership rights to these assets.
It is also important that companies understand and spell out the ownership rights of any intangible assets that result from joint development or R&D arrangements, as well as outsourced contracting arrangements.
3. Hazardous use of open source code software
a. Today, 80% of all software code is open source with almost every company utilizing it in some way. However, there can be significant ownership and cyber security issues around the use of open source code software if it is not managed correctly.
To mitigate this risk, companies need to understanding who actually owns the open source code being used; the licensing terms of the software and how it impacts on the company’s own proprietary code; and associated cyber security risks.
4. Not owning your brand, or brand infringement
a. Many companies we see do either not own or control their brand, or face major brand infringement risks. A brand is often times a company’s most valuable asset, yet many companies do not understand trademark law or trademark strategy.
To mitigate this risk, companies need to ensure that as they create new markets and new products, enter into new geographies, or establish new relationships that their trademarks cover the new arrangements. Companies also need to ensure that they have the right protections in place before entering into a joint venture or distributor arrangement to ensure that the partner does not end-up owning or controlling the brand.
5. Threatened or actual Intellectual Property litigation
a. There has been a significant increase in intellectual Property litigation in many countries over the last decade.
To mitigate this risk, companies need to take the time to understand any risk exposure to Intellectual Property litigation early on and take proactive, rather than reactive, measures to minimise this threat.
Intangible asset risks can be mitigated with foresight and planning. However, if these risks aren’t identified and managed, then they have the potential to have a significant negative impact on a business as the cost of fixing these issues after they’ve occurred is high. If you treat risk mitigation around your intangible assets as important and urgent, then you avoid a number of costly issues occurring.
By Michael Masterson, Managing Director – Australia & New Zealand, EverEdge