The acceleration of digital business models, amplified by COVID-19, could lead to intangible assets becoming a “major blind spot” for companies not factoring them into their risk models.
This is according to a new report published by Lloyd’s and KPMG, which urges businesses to pay attention to the new risk landscape that has evolved under the pandemic.
The report notes that intangible assets are an increasing proportion of companies’ balance sheets, and already account for as much as 85% of the total business values across industries.
“The pandemic has disrupted global supply chains and moved the world towards de-globalisation,” said Lloyd’s and KPMG. “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.”
Lloyd’s and KPMG assert that COVID-19 has increased companies’ exposure to new risks, many of which implicate the intangible assets held by businesses.
Firms are facing increased threats to resilience in this environment, including more reputational issues due to behavioural scrutiny, as well as intellectual property and conduct risk stemming from remote working.
“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 argued.
Against the backdrop of these challenges, the Lloyd’s market is working to develop products that help organisations mitigate their exposure to risk.
“As an industry we need to recognise that the world has changed and adapt to how it looks now,” said Trevor Maynard, Head of Innovation at Lloyd’s. “COVID-19 has changed the risk landscape, exposing companies to new risks and encouraging companies to think about how they now operate.”
He continued: “Whilst a range of insurance products already exist to help organisations manage their risks related to reputation, human capital, and intellectual property, it is important that at Lloyd’s we work together with the market to innovate and create new products to help customers mitigate risks and protect themselves from future threats.”
Paul Merrey, Partner at KPMG, also commented: “As we move swiftly into the new reality, it’s apparent that many businesses aren’t adequately prepared for it. The key drivers of corporate value are completely different now to in the past, and this shift has only been amplified by COVID-19.”
“Whilst physical assets are still a focus, recognition of what intangible assets are and how much they represent a firm’s value may come as a hard awakening for some organisations,” Merrey added.
“In order to remain resilient and competitive, organisations across all industries must be proactive in finding new ways to enhance their business practices to protect these assets, and this will require a new way of thinking and acting.”
