Intellectual Property: Defense is the Best Offense

Intellectual property is worth a good strategy for risk management.

Identifying a company’s intellectual property can sometimes be a fuzzy exercise, but it’s clear that failing to do so and not having a risk management strategy to safeguard a business’ “secret sauce” can lead to dire consequences. That’s especially true for startups whose only real asset may be the big idea that got them going in the first place.

Still, intellectual property and risk management consultants say companies may not be doing as much as they can to protect their IP assets, which can include everything from product formulas to customer lists.

Risk Institute Portraits Fisher Hall - Third Floor Feb-02-2016 Photo by Jay LaPrete ©2016 Jay LaPrete

Philip Renaud, executive director of the Risk Institute at Ohio State University’s Fisher College of Business

“I wonder if inside the doors people are having enough robust conversations about what their intellectual property is and what needs to happen to manage the risk,” says Steve Snethkamp, a partner in the Columbus office of EY. His consulting practice covers a variety of industries with a focus on information technology.

The stakes are high, he says, pointing to incidents in which the technology behind a new product has been stolen and implemented by overseas competitors even before the IP owners can get that product to market. And it’s not easy to manage that risk, especially with all the data that can be shared—and exposed—through the ever-increasing use of mobile technology and interconnected devices.

“There is no silver bullet,” Snethkamp says, “but the first thing (for companies) is to create a cultural awareness that security is important and IP is the lifeblood of the organization. That needs to be the mantra of every person in the company from the janitor to the CEO.”

Then businesses need to clearly define their intellectual property, identify where it is located, make an inventory of it and put in place controls, processes and procedures to protect it appropriately.

“It’s hard stuff to do,” Snethkamp says.

But it’s also essential given the findings of a 2013 study by the independent Commission on the Theft of American Intellectual Property. It estimated that international thefts of intellectual property have an impact of more than $300 billion annually on the US economy, costing the country millions of jobs and dragging down economic growth and investments in research and development.

Risk managers historically were focused on hard assets—buildings, equipment and inventory—but that has shifted to intellectual property and intangible assets such as copyrights, patents, technical processes, trade secrets, customer lists and distribution networks, says Philip Renaud, executive director of the Risk Institute at Ohio State University’s Fisher College of Business. He has worked in the risk management field since the early 1980s, including stints with L Brands, Kmart, Exel and Deutsche Post.

“It’s much more difficult to value an intangible asset and protect it,” Renaud says. “I can’t put a sprinkler system and firewall around a copyright.”

In his opinion, IP risk management in many cases becomes a defense strategy in which companies must educate team members about the importance of protecting the brand. That is particularly the case of detailing the risks when employees are working online and sharing data.

Such preventative steps are especially important, Renaud says, because of the difficulty and expense of stopping an IP infringement after the fact.

“That’s the greatest challenge,” he says. “If the company that has infringed on you is exposed, the only way to get there is through legal proceedings. That costs a lot of money.”

There is also the thorny issue of taking legal action when an IP infringement occurs overseas. “How do you get enforcement in China?” Renaud asks.

His best advice for companies is to make sure they understand their intangible assets—how they are used, their value to the business and how they are being protected.

When looking to protect intellectual property, companies should consider registering their rights with patents, trademarks and copyright, says Susan Rector, an attorney at the Columbus office of Ice Miller LLP. She represents companies in all aspects of IP ownership and information technology transactions.

“Inherently, taking the steps to register the rights to your intellectual property gives you a leg up,” Rector says. “That’s important from a defensive standpoint. It can also be used offensively against people who come too close to your (IP) rights.”

She works with a lot of startup companies that are building their business model around a proprietary product that is far and away their most valuable asset.

“Often it’s two guys, a laptop and an idea,” Rector says. “A lot of them will get big valuations (from investors), but people will only back them if no one else has done it. … They need to think about an intellectual property strategy early. If they don’t, they can lose their ability to protect that product or device.”

Intellectual property presents some specific challenges for risk managers, says Nicholas Kaufman, head risk manager at Battelle in Columbus.

First, it can be difficult to place a value on IP assets because they can be hard to measure, especially compared to property risks or auto liability. Second, Kaufman says there really is no insurance market for intellectual property because mature insurers tend to organize around areas they understand and know the likelihood of payouts on policies. That’s not the case with IP because of the difficulties in placing a value on the assets and calculating the risks to them.

Despite those issues, companies still need to have a risk management program in place for their intellectual property assets because the stakes can be so high. Kaufman says Battelle’s program takes an enterprise-wide approach in managing the IP risks for its range of products, services and research it conducts.

“We look at it holistically,” he says. “It’s not just about defending our intellectual property but making it as easy as possible for our scientists to create IP.”

Kaufman says intellectual property best practices start with an understanding of your organization and how IP brings value. Then it becomes a matter of aligning resources to protect that value.

The sooner that companies think about protecting new intellectual property the better, says Ari Zytcer, a Vorys, Sater, Seymour and Pease LLP attorney who has worked in the IP field for more than 10 years. But he also recognizes that can be easier said than done.

“In identifying intellectual property,” he says, “you’re starting in the dark. Is this going to be a commercially successful product or an intermediary that leads to something down the road that you would like to protect and stake a claim? You don’t know what aspects you’d like to protect (with a patent) … so we see broad coverage at the beginning. As development continues, you home in on what is commercially viable and blocking other companies from getting into that space.”

Zytcer also says there is no one-size-fits-all approach for IP risk management.

Small companies, for instance, have to consider whether it is best to spend limited resources on patent procurement versus funding research and development and breaking into a market. Large companies generally take a more holistic view with IP committees drawn from the business side—risk management, legal, finance and marketing for example—and R&D side of the enterprise. They track new inventions and make the call on the allocation of resources for patents, trademarks and other IP safeguards.

“Having a cohesive policy for the company is crucial,” Zytcer says. “It’s almost like a marriage. The right hand needs to know what the left hand is doing.”

Jeff Bell is a freelance writer.

Area Companies Learn to Navigate Political Risk

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Whether an organization is a multinational player or just starting to explore expansion into the global market, political risk cannot be ignored or underestimated. Political risk is taking on new forms, both real and perceived, and may be at its highest level since the Cold War.

In order to succeed, companies must elevate their awareness of inherent challenges of everything from political violence to currency inconvertibility.

On November 15, The Risk Institute at The Ohio State University Fisher College of Business welcomed dozens of area and regional professionals to Navigating Political Risk in Uncertain Times (part of this year’s Risk Series) — an executive education session that explored effective ways to manage political risk and gain insight on how to navigate the landscape and find potential for competitive advantage.

The Risk Institute is thankful for the informed leadership of our session experts: Les Brorsen, Americas Vice Chair Public Policy at EY; Professor Richard Herrmann, Professor & Political Science Department Char at The Ohio State University; Roger Schwartz, Senior Vice President at Aon Risk Solutions; and Sarah Brooks, Associate Professor of Political Science at The Ohio State University.

The session centered around three concepts:

  • Learning to identify, measure, and manage political risk
  • Examining the macro-level political risks that could affect business interests
  • Exploring the relationship between the state and market in social and economic relations

The session’s thought provoking ideas and dialogues advanced The Risk Institute’s unique role in uniting industry thought leaders, academics and highly respected practitioners in an ongoing dialog to advance the understanding and evolution of risk management. The Risk Institute’s conversation about risk management is open and collaborative and relevant across all industries.

Start the New Year off right — registration is now open for our next Risk Series on supply chain resilience on January 24, 2017. We’ll see you there!

Risk Case Competition a Success

img_5464The Risk Management Association at Fisher College of Business in partnership with The Risk Institute held a case competition earlier this month which exposed its participants to the technical aspects of risk management while also developing their critical thinking and presentation skills.

Seven teams competed in the two-week competition, which culminated in presentations to an expert panel of judges: Nick Kaufman, Head Risk Manager at Battelle; Dr. George Pinteris, Associate Professor of Finance at The Ohio State University; Dr. Jay Wellman, Associate Professor of Finance; Daniel Chizever, Senior Director of Risk Management at Abercrombie & Fitch; Jonathan Caruso, Risk Manager at Express.

The winning team included John LaVange, junior; Sam Bernardo, senior; Zhe Wang, senior. Awards were also given out for Best Speaker — George Valcarcel and Carly Smith — and Best Q&A — Ryan Patrick.

Navigating Political Risk in Uncertain Times

social-media-politicsJoin us on November 15 at 10 a.m. to explore effective ways to manage political risk and gain insight on how to navigate the landscape and find potential for competitive advantage.

Whether your organization is a multinational player or just starting to explore expansion into the global market, political risk cannot be ignored or underestimated. Political risk is taking on new forms, both real and perceived, and may be at its highest level since the Cold War. Companies have to elevate their awareness of inherent challenges of everything from political violence to currency inconvertibility.

Executives will learn:

• To identify, measure, and manage political risk

• To examine the macro-level political risks that could affect your business interests

• About the relationship between the state and market in social and economic relations

The Institute will welcome Les Brorsen, Americas Vice Chair Public Policy at EY; Professor Richard Herrmann, Professor & Political Science Department Char at The Ohio State University; Roger Schwartz, Senior Vice President at Aon Risk Solutions; and Sarah Brooks, Associate Professor of Political Science at The Ohio State University.

If you’re interested in attending, contact Denita Strietelmeier at (614) 688-8289 or send an email to RiskInstitute@fisher.osu.edu. For more information about this and the upcoming sessions in our Risk Series, please visit our website.

Build a bridge or blaze a trail: how companies respond to major technological change

Technology is changing our world more quickly than anyone ever anticipated. Everything from customer tastes to regulations is forcing companies to develop radically new capabilities in order to compete. So when faced with these major developments, managers are faced with a tough question: build a bridge or blaze a trail? choose-path

According to the findings from the study “Alliance Activity as a Dynamic Capability in the Face of a Discontinuous Technological Change” by Jaideep Anand, Raffaele Oriani, and Roberto Vassolo, some managers attempt to develop new technologies in-house while others seek alliances to access those technologies.

Option #1: Blaze a trail & develop new technologies

  • Many managers choosing to develop technologies in-house do not realize that existing technologies can be a handicap — not a help.
  • Firms with stronger technological capabilities are more likely to enter new domains.
  • Remember, even though you aren’t building external relationships, you still need complementary capabilities, such as being proactive in seeking new technologies and having a strong internal development research team.
  • Firms with capabilities in traditional technologies do not have an advantage in entering emerging technological fields through internal development. In fact, capabilities in the traditional technology not only decrease the likelihood of entering new domains but also might have a negative effect

Option #2: Build a bridge & form alliances

  • Managers seeking alliances may not know that successful alliances require more than connecting technological capabilities.
  • Technologically disadvantaged companies also are less likely to enter new domains.
  • Firms with good complementary capabilities are more likely to find competent partners and access their capabilities.
  • Alliances build the “give-and-take” relationships that effective alliances require. In the study, creating alliances in the pharmaceutical industry gave companies the technology they needed in exchange for testing, marketing and distribution.

If you want to dig deeper into this (and other) of the latest risk research, the full paper and accompanying translation are available on our website.

Risk Institute board chair elected chair of Risk Management Association

Helga Houston, chief risk officer at Huntington and chair of the board at The Risk Institute, was elected chair of The Risk Management Association (RMA). Her one-year term began September 1, 2016.

Helga Houston speaks at Risk Institute Annual Conference 2016

Helga Houston speaks at Risk Institute Annual Conference 2016

Helga Houston is past vice chair of RMA’s Board of Directors.

Houston has over 30 years of diversified banking experience in risk management, business development, and client relationships. Prior to joining Huntington, she held positions with Bank of America, Crocker National Bank, and Home Federal Savings and Loan.

Houston earned her bachelor’s degree from Westmont College and her MBA from the University of Southern California.

About RMA

Founded in 1914, The Risk Management Association is a not-for-profit, member-driven professional association whose sole purpose is to advance the use of sound risk management principles in the financial services industry. RMA promotes an enterprise approach to risk management that focuses on credit risk, market risk and operational risk. Headquartered in Philadelphia, Pennsylvania, RMA has 2,500 institutional members that include banks of all sizes as well as nonbank financial institutions. They are represented in the Association by 18,000 individuals located throughout North America, Europe, Australia, and Asia/Pacific.

About The Risk Institute

The Risk Institute at The Ohio State University Fisher College of Business exists to bridge the gap between academia and practice. The Institute is a collection of forward-thinking companies and academics that understand effective risk management strategies not only protect firms, but position firms to create growth and value. The Institute operates in a unique intersection between our faculty, students, and professionals from a broad cross-section of industries.  With our leading-edge approach to risk management, The Risk Institute creates a space for risk-centered conversations, ideas, and strategies that are unlikely to happen anywhere else.

This release originally published on Sept. 6, 2016.

3 things you need to know to succeed in risk

Panelists from the Women. Fast forward panel at this year's annual conference

Panelists from the Women. Fast forward panel at this year’s annual conference

Disruption and gender diversity are two of the biggest topics facing business leaders today. Both issues are critical to the future of every industry. And they’re closely connected.

The best way to navigate disruption is to harness the power of diverse thinking by enabling people with different experiences, ideas and knowledge to come together in an inclusive culture. Gender diversity is a critical part of the equation. Not only this, gender diverse leadership is proven to increase the skills businesses need to navigate the disruptive trends transforming their industry.

So what does this mean?

If a person, or company, wants to succeed in mitigating risk, they must embrace gender diversity at every level.

In short, everyone benefits from thinking like a woman.

  • “You need to get comfortable being uncomfortable” — Jessica Jung, Director, Oswald Companies

Achieving success isn’t something that just happens to a person. It requires a lot of hard work, tough choices, and generally being willing to put yourself out there— trying something new.

  • Have an entrepreneurial spirit

No matter if you’re the intern grabbing Starbucks for your department or a C-suite executive, don’t be afraid to think outside the box. When approaching any situation, don’t come to the meeting and just point out the risks — offer real solutions.

  • Communicate. Communicate. Communicate.

Every panelist punched this point home — communicate with everyone, from your spouse to your organization and boss. By being an open communicator, you project to others that you are confident, open to compromise, and available.

Each year, The Risk Institute at The Ohio State University Fisher College of Business hosts an annual conference that brings together thought leaders, industry experts, and academics to engage in a dialogue about the latest trends in risk management. This year the conversation focused around governance, culture, and the vital role women play in the field.

One of the Institute’s founding member’s, EY, cosponsored a panel spring-boarding their Women. Fast forward initiative, which aims to accelerate the achievement of gender parity in business.

The Risk Institute will continue this conversation and others through this year’s Risk Series.

Governance and culture take center stage at The Risk Institute’s Annual Conference

Conversation surrounding governance and culture recently took center stage at The Ohio State University Fisher College of Business, as The Risk Institute explored the impacts of the two key aspects of business at its Annual Conference. The two-day conference brought together Risk Institute members, business leaders, experts and faculty thought leaders from Fisher for an in-depth examination of the risk management and strategic implications of governance and culture.

Phil Renaud and Jeni Britton Bauer of Jeni's Splendid Ice Creams discuss maintaining culture through crisis.

Phil Renaud and Jeni Britton Bauer of Jeni’s Splendid Ice Creams discuss maintaining culture through crisis.

Considering the various sides of governance and culture is critical to understanding how to leverage risk management to create value for an organization. The conference featured four keynote speakers, Gordon Bethune, former CEO of Continental Airlines; Cameron Mitchell, founder and CEO of Cameron Mitchell Restaurants; Randall Kroszner, former Governor of the Federal Reserve System; and David Gebler, author of best-selling book The 3 Power Values.

Bethune opened the conference and focused on his experience turning around Continental Airlines over a decade, which is detailed in his book, From Worst to First. He emphasized the importance of building accountability between employees and the organization saying, “What gets measured and rewarded, gets done.”

Mitchell is a self-described serial entrepreneur who understands that taking risks is necessary to be successful in business saying, “I may shoot myself in the foot and walk with a limp, but I’ll never shoot myself in the head and make a fatal mistake.”

Academic Director Isil Erel speaking at Annual Conference 2016.

Academic Director Isil Erel speaking at Annual Conference 2016.

During his time with the Federal Reserve System and as a professor of economics at the University of Chicago, Kroszner never imagined he would be helping guide America’s economy through the worst financial crisis since the Great Depression. He discussed the potential ramifications of the Fed keeping interests rates at historic lows since 2008 saying, “When your short-run policy becomes a long-run policy, you will always run into unintended consequences.”

Named one of America’s top Thought Leaders in Trustworthy Business Behavior, Gebler is an innovator of new approaches that integrate culture, ethics, values and performance. His talk detailed how to know if your organization’s culture is a risk factor utilizing the three power values— integrity, transparency and commitment.

In addition to the keynotes, the third-annual conference brought together business leaders and experts for a series of RISKx presentations and panel discussions on women in risk, governance and culture related to business. The culture discussion explored  employees’ attitudes toward risk, mergers and acquisitions, maintaining culture through crisis, and emerging risks in the energy industry.

The Risk Institute’s Executive Education Series will resume November 15 with a discussion on Political Risk.

 

Building responsible and resilient supply chains

Supply chains have become global and highly complex. Building and maintaining a resilient supply chain is a key success factor for businesses operating in a fast-changing world.connected-globe-rgb-international

EY Climate Change and Sustainability Services (CCaSS) collaborated with the UN Global Compact on the study in an effort to better understand how companies are managing their supply chains in ways that support the objectives of the United Nations 2030 Agenda and Sustainable Development Goals (SDGs).  The UN Global Compact is the world’s largest sustainability initiative and EY has been a participant since 2009.

The report draws on business inputs across geographies, sectors and business models. CCaSS and Advisory Supply Chain and Operations professionals interviewed 70 clients globally to explore how they are embedding sustainability in their supply chains by managing risks and adopting new commitments around human rights, the environment and the well-being of communities in which they operate.

Overall, the study indicates that by improving environmental, social and governance (ESG) performance throughout the supply chain, companies can enhance processes, reduce costs, increase productivity, innovate, differentiate and improve societal outcomes.

Conclusions explored in the report include:

  • Companies are on a continuum from managing risks through creating shared value with stakeholders to achieving differentiation for their products or services;
  • Leaders are achieving competitive advantage in the supply chain through increased collaboration, technology innovation, greater efficiency and supplier diversity;
  • Mature supply chain models integrate buying and sourcing practices with product design and development to enhance sustainability results tied to their manufacturing and service delivery;
  • Currently, only a small percentage of companies have achieved leadership maturity levels that can lead to shared value with suppliers, enable suppliers to operate as an extension of the business and engage in meaningful, collaborative dialogue.

Based on interviews we identified several actions companies can take to further embed sustainability in their supply chains:

  • Assess materiality, to focus on the most pressing issues, taking UN Global Compact principles into consideration
  • Align resources, structures and processes to focus on supply chain sustainability across the organization
  • Train management and suppliers on market practices
  • Invest in diverse and inclusive supply chain partners
  • Stretch existing sustainability goals beyond direct operations, to include tiers of the supply chain
  • Deploy technology to increase accountability and transparency
  • Leverage buying power and influence to trigger shifts toward supply chain sustainability
  • Disclose supply chain information, beyond stand-alone sustainability reporting mechanisms

This post was written and published by EY, one The Risk Institute’s founding members, in August 2016. To view the original article or download detailed study findings, click here. 

From Risk to Resilience: Find (& Overcome) Your Company’s Weakest Link

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Don’t fall through the cracks — grow through them.

In an interconnected, volatile, global economy, supply chains have become increasingly vulnerable. Disruptions — even minor shipment delays — can cause significant financial losses for companies and substantially impact shareholder value. Globalization has made anticipating disruptions and managing them when they do occur more challenging. The potential risks of disruptions are often hidden, and the potential impacts may not be understood, which often results in black swan events – events that can only be fully understood after the fact.

Over the last seven years, researchers at The Ohio State University have been exploring the concept of enterprise resilience, i.e. how companies can prosper in the face of turbulent change by being able to recognize, understand, and compensate for vulnerabilities.

The result is the SCRAM (supply chain resilience assessment and management) framework, which enables a business to identify and prioritize the supply chain vulnerabilities it faces, as well as the capabilities it should strengthen to offset those vulnerabilities.

Six Vulnerabilities You Need to Know About

Every business has its vulnerabilities, and most of the time those vulnerabilities are inherent to the business and difficult to avoid, but by recognizing them, you’ll be better equipped to deal with disruptions as they happen.

1. Turbulence

Definition: Environment characterized by frequent changes in external factors beyond the company’s control

Examples: Unpredictability in demand, fluctuations in currencies and prices, geopolitical disruptions, natural disasters, technology failures, pandemics

2. Deliberate threats

Definition: Intentional attacks aimed at disrupting operations or causing human or financial harm

Examples: Terrorism and sabotage, piracy and theft, labor disputes, special interest groups, industrial espionage, product liability

3. External pressures

Definition: Influences, not specifically targeting the company, that create business constraints or barriers

Examples: Competitive innovation, government regulations, price pressures, corporate responsibility, social/cultural issues, environmental, health and safety concerns

4. Resource limits

Definition: Constraints on output based upon availability of the factors of production

Examples: Raw material availability, utilities availability, human resources, natural resources

5. Sensitivity

Definition: Importance of carefully controlled conditions for product and process integrity

Examples: Restricted Materials, supply purity, stringency of manufacturing, fragility of handling, complexity of operations, reliability of equipment, safety hazards, visibility of disruption to stakeholders, symbolic profile of brand, customer requirements for quality

6. Connectivity

Definition: Degree of interdependence and reliance on outside entities

Examples: Scale and extent of supply network, import/export channels, reliance on specialty sources, reliance on information flow, degree of outsourcing

So in the face of all these disruptions, what’s the answer?

Answer: resilience.

Resilience is the capacity of an enterprise to survive, adapt and grow in the face of turbulent change.

Resilience means improving the adaptability of global supply chains, collaborating with stakeholders and leveraging information technology to assure continuity, even in the face of catastrophic disruptions.

Resilience goes beyond mitigating risk; it enables a business to gain competitive advantage by learning how to deal with disruptions more effectively than its competitors and possibly even using those disruptions to its advantage.

Resilient systems don’t fail in the face of disturbances; rather, they adapt.

 

Article adapted from “From Risk to Resilience: Learning to Deal with Disruption,” by Joseph Fiksel, Mikaella Polyviou, Keely L. Croxton, and Timothy J. Pettit.

The Risk Institute at The Ohio State University’s Fisher College of Business exists to bridge the gap between academia and corporate America. By combining the latest research with the real-world expertise of America’s most forward-thinking companies, the Risk Institute isn’t just reporting risk management’s current trends — it’s creating tomorrow’s best practices.