Lloyd’s and KPMG have warned businesses across the world are often unaware of the huge intangible risks they are exposed to, and have called on the industry to create the products to fill the current void.

The pair have published a new report, Protecting Intangible Assets: Preparing for the new reality, which urges businesses to pay attention to the new risk landscape that has evolved under the global pandemic.

“COVID-19 has disrupted global supply chains and has moved the world towards de-globalisation,” warned the report. “It has changed working arrangements, businesses’ ability to trade, consumer behaviours, and the role of the state. It has also created a new social contract between business and society.

“In many ways, it has accelerated underlying market trends such as the shift to remote workforces and digital transactions. The fundamental shift towards a new world dominated by intangible assets like reputation, human capital, and intellectual property, started decades ago, long before any detailed discussions about looming pandemic risks.”

“Restrictions enforced for public health purposes have accelerated progression towards a new reality,” it added. “An increasing number of executives have started questioning the return to normal even after COVID-19 disappears. That means that we suddenly have a world where most of the workforce and business data (including potential trade secrets) is scattered across thousands of living rooms, kitchens, and bedrooms, while expensive office buildings are kept empty.”

Dr. Trevor Maynard, Head of Innovation at Lloyd’s said: “As an industry we need to recognise that the world has changed and adapt to how it looks now. COVID-19 has changed the risk landscape, exposing companies to new risks and encouraging companies to think about how they now operate. 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.”

The report examines how COVID-19 has increased companies’ exposure to new risks, many of which implicate the intangible assets held by businesses. With unprecedented scrutiny on firms’ behaviour, reputational issues are just one of many posing a threat to firms’ resilience during the pandemic. New ways of working are 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.

“In the face of these amplified challenges, the Lloyd’s market is developing products to help organisations mitigate their exposure to risk, and the report outlines a range of examples of products already available in the market in response to the risks posed to reputation, human capital and intellectual property,” stated the report. “It also highlights the vital role the insurance community has to play in helping organisations manage these challenges so that they are better prepared to protect their assets.”

Paul Merrey, Partner, KPMG added: “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. 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.”