The intangible assets of a business, while evolving over the past forty years, are now challenged in new ways thanks to the change brought around by the pandemic.
There are eight mainstays of a business’ intangible assets.
- Intellectual property
- Proprietary software and databases
- Written processes and procedures
- Organisational culture, rules, and norms
- Reputation and brand
- Relationship with customers
- Relationship with distributors and partners
- Human capital
KPMG and Lloyds assert that reputation and brand, human capital and intellectual property are the most valuable, and could represent 85% of the total value of a business, according to their estimates.
The challenge and variations to these assets have come under unquantifiable pressure from the pandemic.
Society and working conditions have changed to take account of social distancing, with a shift towards working from home for an indefinite period. Expensive offices are empty. Valuable IP is left on kitchen tables across the country. There is increased reputational risk as businesses pivot through the new normal.
To add to the change in risk, many executives are considering which of the pandemic’s changes will stick in the future.
In order to help insulate your business from disruptive change, the report recommends these five actions.
Five ways to protect your business
- Assess the total intangible value of your organisation. This involves working out their contribution to your balance sheet and putting a number to it. Are there other hidden intangibles worth like human capital or reputation that are valuable but not visible in the accounts?
- Rate the relative value of different types of intangibles in your organisation; determine which are important to your success. Which assets bring you competitive advantages, or maximise shareholder value?
- Perform war game exercises, test your resilience, determine your weaknesses. Try to prevent risks from happening by looking at internal and external risks across all intangible categories.
- Assess your ability to adequately monitor intangible asset value change. This includes assigning each asset a clear risk owner who should be at management level. Consider using corporate partners, like communications agencies, to further understand risk and value.
- Determine if there are risks you cannot deal with in the business and evaluate what financial solutions are available. Insurers can help you transfer some of the risk off your balance sheet and can help you prevent risks from happening and respond to adverse events.