Feature
Lloyd’s warns intangible assets at risk I
ntangible assets are an increasing proportion of companies’ balance sheets, already accounting for as much as 85% of the total business value across industries according to estimates. With the acceleration of digital business models, amplified by Covid-19, this value could now increase much further, becoming a major blind-spot for firms not factoring intangible assets into their risk models. Lloyd’s, the world’s leading specialist insurance and reinsurance market, has published a report in collaboration with KPMG urging businesses to pay attention to the new risk landscape that has evolved under Covid-19. Protecting intangible assets: Preparing for a new reality looks at the increasing value of intangible assets, and the role of risk managers and the insurance industry in protecting them. It said the pandemic has disrupted global supply chains and moved the world towards de-globalisation. It has changed working arrangements, businesses’ ability to trade, and consumer behaviours. It has also created a new social contract between businesses and society and has accelerated underlying market trends such as the shift to remote workforces and digital transactions. The new report looks at how Covid-19 has increased companies’ exposure to new risks, many of which implicate the intangible assets held by businesses.
10
September 2020
With unprecedented scrutiny on firms’ behaviour, reputational issues were just one of many posing a threat to firms’ resilience during the pandemic, it warned. New ways of working were also presenting their own unique challenges, amplifying the complexity of managing intellectual property and conduct risk amongst a remote workforce. For businesses to stay resilient, operationally and financially, awareness of what intangible assets are and how they can be protected is critical and must form a considerable part of their risk management strategy. The report looked at eight intangible assets: Intellectual property, proprietary software and databases, written processes and procedures, organisational culture, rules, norms, relationships with customers, reputational and brand, relationships with distributors, partners and human capital. The report said the fundamental shift towards a new world dominated by intangible assets started decades ago, long before any detailed discussions about looming pandemic risks. Step-by-step, the importance of intangible assets grew – from around 17% of S&P asset value in 1975, to 32% in 1985, to 68% another decade later in 1985, and ultimately exceeding 80% in the last 10-15 years. “This has been closely linked to the changes in the economic landscape, with technology-driven service companies becoming
