When it comes to value preservation, investment firms and their private wealth management offices seem to have the right idea. They often talk of offering 'a truly integrated service to help preserve and grow the wealth of clients’ and promise real partnerships to ‘manage, protect, and preserve family wealth’. The concept of wealth preservation (or value preservation) is explicitly called out as a strategic imperative. It’s part of the offering.
So why don’t corporate boards call out value (wealth) preservation as a strategic imperative too? Why permit value preservation to sit as a sub-heading under risk or risk management?
Value generation vs. preservation
There’s no doubt that value generation, the core purpose of business, is treated differently to value preservation. The business of business is to turn a profit, to make money. But despite this core purpose being self-evident it is still explicitly called out.
Last week, I sat down intending to have a conversation with corporate strategist and author Sean Lyons about the importance of value preservation as a corporate imperative. This turned out to be less a conversation and more like a masterclass in corporate defense.
Getting value preservation onto everyone's agenda
While value generation is a crucial cog for any business, preservation of this value is equally important. The last two words any board wishes to hear after a cyber attack are 'foreseeable' and 'avoidable'. Yet many cyber attacks are both of these, so why aren’t more businesses putting the right infrastructure in place to prevent these, and taking value preservation seriously?
Given that cyber attacks can deplete a firm’s resources, disrupt business and require significant funds to return the business to normal operating conditions, including cybersecurity as part of an overall value preservation strategy should be on every corporate board’s agenda. After all, if your wealth and resources are left open to attack because of a lack of clear value preservation imperatives, one could even question the true worth that your value generation has in the first place.
Preserve first, enhance second
But there is hope, and getting value preservation recognised and on the corporate agenda may be just around the corner as it’s now increasingly acknowledged as a primary purpose. During our session, the latest in a series of Red Sift Ask the Expert episodes, Sean pointed to the International Corporate Governance Network (ICGN) Global Stewardship Principles which set out, he explained, ‘significant advancement in corporate thinking’.
Sean noted that the preamble sets out the importance of preserving value, bringing the matter to attention front and center. ICGN wrote: ‘Stewardship is about preserving and enhancing long-term value’. The order in which these keywords appear evidences an interesting prioritization of concepts: preserve first, then enhance.
The concept of value preservation is discussed later in parts one and two. In part two, under the section headed ‘Internal governance: foundations of effective stewardship’ they wrote: ‘Investors should recognise that a primary responsibility is to preserve and enhance value which is aligned in the interest of beneficiaries or clients.’
So there we have it
Perhaps this represents the starting point for firms to recognise that while value generation is the overarching purpose, it means nothing if that value is flying out the back door. Preservation of value is critical and central to every firm’s corporate strategy, and its adoption as a necessity will pave the way for a safer and more sustainable corporate future.
To watch Sean and Rois’s conversation in full, you can watch the latest Ask the Expert episode here >
