The second article in our series on the rise of "intangibles", we explore the less talked about intangible asset: people.

It this so-called ‘people element’ that is perhaps one of the most challenging risks to identify. Changes to organisational culture can cause disruption to intangible assets, for example a cyber incident, or major fraud. Such impacts may not have been considered during the risk identification process or business continuity planning.

Karla Gahan, deputy head of risk and advisory at VinciWorks, says while people are a company’s most critical asset, they can inadvertently exacerbate or contribute to risks to intangible assets.

“Organisations may neglect the impact to people during a disruption, or the fact that people behaviour can be a risk in itself. We live in a time where constant change can impact our health and wellbeing and our behaviour may be negatively impacted – from stress-related illnesses causing absence of key individuals, to insider threats and fraud, as well as the possibility that a negative organisational culture can cause people to leave. And these behaviours are simmering even before a significant incident affects an organisation.”

Corporate crises are complex events with multiple causes. Research commissioned by Airmic, reveals that human behaviour and people risk takes many forms. At a basic level there is human error—think of the Equifax employee who allegedly failed to communicate the need for a software patch, leading to one of the largest data breaches of all time. Sometimes, however, a crisis is triggered by gross misconduct—think Kweku Adoboli whose unauthorised trades cost UBS about $2 billion. 

As a result, says Airmic, people risk can be brushed into the “too hard” category, and risk management efforts are instead focused on more tangible assets with a clearer link to the balance sheet. Traditional risk management tools – controls and procedures – can certainly play a role in managing people risk effectively. For example, organisations can take practical steps to minimise the opportunity for employees to deviate from company policy, while making clear there will be repercussions in the event of misconduct.

If improving controls and procedures sounds like a basic and limited approach to people risk management, however, Behavioural Economics (BE) is all about knowing what makes people tick and using that (intangible) knowledge to improve your business.

Corporates tap into the unconscious biases that influence everyday actions and discover which of them drive their customers’ buying behaviour. Swiss Re, for example, is reportedly the only reinsurer with a dedicated, global team of BE experts. By partnering with its clients to conduct live trials, Swiss Re says that it has already demonstrated a series of tangible, sometimes counter-intuitive results. It pairs its behavioural expertise with clients’ in-depth knowledge of customer pain points to create “we’ve done it” moments.

According to behavioural science, people’s decisions are not always fully rational and can often be influenced by context. So the only way to understand these unconscious drivers is to move away from surveys and focus groups, and see how people react in the real world.  Through a test-and-learn approach, Swiss Re says it is gaining new insights into many of the behaviours important to its clients, from opening letters and answering calls to giving accurate information or clicking on an offer.