Intellectual Capital Management as Risk Management: A Case Study from India

A review of the annual reports of Indian companies across sectors, reveals the fact that majority of them do not adopt standard practices or deploy known Intellectual Capital (IC) models to manage their intangible assets. The term - Intellectual Capital - is mostly used with reference to the qualification and experience of employees, who are acknowledged as critical assets and details of training and development activities is provided in occasional cases. The paper aims to explore an approach which can be utilized to make the practice of managing Intellectual Capital more popular and widespread in an emerging economy like India. The approach is adopted in an electrical engineering services company based out of Pune, a city in the western region of India. The company was established in the year 1991 and undertakes turnkey projects of electrical installations including design, engineering, supply, installation, testing and commissioning for power distribution, electrification work etc. A preliminary discussion about IC Models revealed that the company was reluctant to invest its time and resources in adopting one. Reframing the discussion from the perspective of managing business risks, the key areas of concern listed down by the management were: i) adverse impact on growth and margins, ii) competent employees leaving the organisation, iii) loss of projects and customers and iv) inefficiency of the company's processes. These risk factors were then connected to various components of IC and a set of indicators finalised in order to manage these risks. The management was comfortable with this approach, which also enhanced focus on relationship with employees and customers. The study brings forth the viewpoint that this approach of listing down the risks to various components of IC, and then drawing a plan of action to minimise those risks - is a simpler and more practical method of IC adoption by companies as they deal with risks as an integral part of doing business in an emerging economy. It will lead to development of an environment that enhances Intellectual Capital and in due course of time, companies would stop treating IC as a complex or alien concept.