Speaker 1  0:00  
Okay, good afternoon and welcome to today's webinar Risky Business why royalty risk assessment and compliance program makes sense presented by Autumn. My name is Samantha Spiegel, autumns professional development manager and I will be your staff host for today. All lines have been muted to ensure high quality audio and today's session is being recorded. If you have a question for the panelists, we encourage you to use the q&a feature on your zoom toolbar. You can submit questions anonymously or as yourself. If you have a technical question or comment, please feel free to use the chat. Should you need need closed captioning during today's session, you can click on the otter AI live stream button on your screen or use the zoom closed captioning feature that is also turned on. Before we begin, I would like to take a moment to acknowledge and thank autumns 2021. Online Professional Development sponsor, we appreciate your ongoing support. And I now have the pleasure of introducing you to today's distinguished speakers. Nate Rooney leads the leads the RSM is contract compliance practice, helping organizations assess their third party's compliance with the terms and conditions of business agreements, including the identification of any monetary discrepancies. Nate has over 18 years of professional experience working with universities research institutions and corporations to assess organization's internal procedures to monitor third party compliance. Liz Watts has over 16 years of professional experience in providing risk advisory and contract compliance consulting services for public and private sector clients, including designing and reporting on contract compliance investigation procedures to help clients identify non compliance of their third parties resulting in significant dollars and monetary errors caused by clerical errors on identified products misrepresent misinterpreted agreement language, or intentional misstatement. Please join me in welcoming Nate and Liz, we are so excited to learn from you both today.

Speaker 2  2:04  
Thanks so much, Sammy. And it's great to be with everyone today. And welcome to the webinar Risky Business why a royalty risk assessment and compliance program makes sense. Now Liz and I are both accountants and we follow the stereotypes and have a horrible sense of humor with terrible puns. So the title we have is probably the most creative thing that we've done during the pandemic. In reality, I probably shouldn't say they'll make millions of dollars instead of cents, but it didn't sound as catchy. So, you know, it's great to be with you today. Just going through the agenda. Say Sandy, thanks for going through introductions. Just a little bit about RSM as well. Now that you've introduced us, for those that might not be aware, RSM is the fifth largest accounting tax and consulting firm in the US. We've got offices in over 84 different cities, 13,000 professionals within the US and then globally, have a footprint in over 130 different countries, 43,000 individuals. And that really helps us in in doing the nature of the work that we do, whether it be from risk assessments to royalty audits of leveraging that international network. Next slide, please. So just with the agenda, a couple of things that want to go through with you today we'll talk about the learning objectives on the next slide. And then I'm going to spend some time talking about what a risk assessment is and why it would be important to your office. And then this will go through and talk about how we actually conduct a risk assessment and what are some internal monitoring considerations you should have based off of that, as well as royalty audit considerations.

Speaker 2  4:03  
So some key takeaways that hoping that you'll gain from our discussion today. First, just you know, we're going to talk a little bit about the strategies to ensure accuracy of payments from licensees current state and future state. And then also look at the risks that are inherent for universities and research institutions with the various licenses that you have in in royalty entitlements. And then based off of that, you know, what is that programmatic plan look like to assess risk of them. Next slide, please. So kicking off with the first section of what is the risk assessment and why it's important. If you go to the next slide, graphic that we want to highlight for you is just spend some time foundationally on what the third party relationship management lifecycle looks like. So if you look at the graphic to the Right, you can see the various blue circles. And those are the key activities within the licensee relationship lifecycle it and broader when we look at things, just third party relationships. So you know, whether that be starting with the planning component, when you're thinking about license agreements, in thinking about your technologies to due diligence and third party selections who you're going to utilize to to license your technology, what does that look like? You know, from a territorial perspective, from an exclusivity to non exclusive perspective, to the actual contracting. And then ongoing monitoring, which we're going to spend a lot of our time around to, to terminations as well. And I think what we've seen, you know, historically, you know, as it relates to royalty audits, most organizations are reactive in nature instead of proactive. And, you know, over the years and doing this, our firm has been doing royalty audits for the past 30 plus years, there has been a shift, you know, and tech transfer offices are becoming more proactive and doing that. But I think when you look at at risk assessment, and you think about that, there still is that mindset, where it's in the infancy stages for a lot of organizations, and building up that maturity of assessing licensees, and how are you measuring and monitoring risks related to them? So let's spend some time going through that. And, you know, it's really important, because if you look at the lifecycle here, and you think about how you spend your time, a lot of its working to get the deal done, right. But then once it the deal signed, what what are we doing afterwards, as as an office and an organization to monitor the third parties and make sure that, you know, they're in compliance with the underlying contracts. And so, you know, the success of the licensees, as you can see here, it's your success as well, you want it to be a great partnership to meet the objectives and establishing that relationship with them is critical. And the risk assessment helps provide a framework and structure just to assess that along the way. So as we continue to go along with the discussion today, I would just consider when you think about your your internal processes, governance, and policy and procedures, you know, in light of this royalty risk discussion. Next slide, please. And so, you know, why is royalty risk, a key consideration for tech transfer offices, you know, if you think about it, we've got the mindset of trust, but verify. And so once license agreements are executed, you're putting your faith and your trust into licensees to self report in accordance with the terms and conditions. It's a blind spot, you know, a lot of what they're doing, you don't have the insights on and the awareness of and so that's why it's important to, you know, bring some focus around this, and how can we start getting some oversight and transparency? You know, in a lot of organizations, you know, you're you're stuck in that ongoing monitoring perspective, where there might be older agreements that came in before your time with with the university, or they're not consistent of how those are, and, you know, so I need to get some more transparency around that. Also the fiduciary responsibility that you have thinking about, you know, if it's a State University, with the, the key stakeholders there, whether it's the inventor, the various colleges, you know, that could have royalty splits around that, you know, want to make sure that protecting the the IP and making sure that all royalties due to the university are being paid. And then, you know, I think just the criticality of it, you know, what we see from doing royalty audits is that over 75% of licensees are non compliant with the monetary provisions of the agreement. So when you think about that revenue, linkage leakage you know, it's important to have that as a focus and and you know, all the different universities and tech transfer offices everyone manages things different, you know, whether it's license managers taking a cradle to grave having a compliance function, or working somewhere in between of how you go through this. But you know, given today's environment you know, and diversity portfolio's it's, it's critical to be able to allocate resources, and the limited resources that we have, you know, from, from people investments that we make, and, you know, time we spend on licensees, and how are we doing that in a strategic manner that's focused, and you know, that has alignment from others. So that's what helped the royalty risk assessment helps bring together I mean, if you think about it, you know, just the diverse nature of your licensees could be a startup to a, you know, fortune 50 organization. And then you think about just the different types of patents that you're licensing, you know, whether it be stem cell technology to a seedless watermelon variety. You know, there's a lot of variables around there. And so risk assessments can help bring a consistent framework. And really what a risk assessment is, and why it's important. It's, it helps bring a sound and robust third party License Management Program. And, you know, if you can get a well conducted risk assessment, it'll help you identify where you're most vulnerable to licensing non compliance, and it can help you prioritize tasks and that deployment of available resources. Ultimately, as you see on the bottom here, that the risk assessment provides a structure and a framework to evaluate your portfolio and develop a unique and specific plan for your university because it'll look different than others to to monitor your royalty risk. Next slide, please. So when you think about it, you know, we talked a little bit about what risk assessment is and why and the values and benefits to that. Really, it's providing structure and accountability. And, you know, you think about maybe problematic licensees that you've got in your portfolio. A lot of times, there's a lot of humming and hawing of what do we do, you know, not a lot of focus maybe on how we handle it, and it's just an inefficient way, inefficient use of utilization of time, you don't want to get stuck in playing whack a mole and fighting fires, you know, are problematic licensees and so the risk assessments and opportunity to get in front of things, you know, and one of those is enabling strategy. So, you know, with various risk levels in the tolerance that you have of licensees, you can help link that, and those licensees to the goals that you have of your office. And so you know what that risk tolerance is defining that and clearly communicating that within the organization's to help with the strategies that you have, and and to help support the mission values and vision that you have. It's also important because it brings more education internally to key stakeholders. You know, what, what are the risks that are driving the portfolio within your office? You know, the education helps bring enhanced risk awareness and dialogue. In going through a risk assessment process, it brings in various stakeholders. So it cuts, it brings multiple perspectives, it helps to cut across silos, and break down those silos so that everyone's speaking the same language and when they're thinking about risk and licensees. And then, you know, as a byproduct of that, there's a consolidated output of the licensee risk and a focused view of who to prioritize and what some of those remediation action plans can be.

Speaker 2  13:53  
The holistic 360 view, you know why that's critical is because you can get better anticipation of risks that are coming by using a consistency of tools, methods and expectations, as well as defining you know, what the risk ratings and the scoring criteria are. Again, it'll help bring more consistency and focus for for monitoring licensees, once agreements have been put into place. And ultimately, what you're trying to get to is reduced operational surprises and increased, you know, more increased certainty. So that can be expectations, but you know, what the licensees and and ultimately, as you work through the maturity model, it might be more focused looking at licensee risk profiles and validating the assumptions and priorities with those. And then, you know, finally the last area just on risk transformation, you know, wanting to be more effective with risk mitigation and monitoring of action plans with metrics. So when you think about it, Um, within your office, you know, are there key risk indicators that are developed? And that, you know, does your office right now have data that aligns with metrics that you track, whether it be through autumn licensee surveys, you know, on the metrics that using that or other just key metrics that you have? How do those metrics align with the risks and the strategy that you have, and you can get you started getting a linkage between how your licensees are performing and the overall metrics that your office utilizes, and develop that gap between strategy and risk monitoring. And so that'll help with accountability for you know, prioritizing certain licensees. It'll give you better anticipation, of, and identification of unexpected, you know, outcomes that happen, how you'll be treating risks, and the efficiency and effectiveness of those, you know, it'll lead to improve decision making, and allocate better allocation of resources as well. Next slide, please. So really, you know, in looking at the the rotary risk assessment objectives, that it's it's helping in To summarize, bring that greater understanding of risk. And it's important to important to the strategic objectives of the tech transfer office, enhancing accountability, with respect to how looking at licensees and really embedding that, that that culture of risk management within to within the, the tech transfer office, and then being able to anticipate, you know, things in the future. So again, looking forward and not always being reactive. So really, that's, that's the foundational activities that we wanted to highlight with you on. You know, what a risk assessment is and why it's important. And so now that we've set that baseline understanding, Liz is going to go through and talk a little bit about how we actually conduct risk assessments.

Unknown Speaker  17:13  
Liz? Excellent. Thanks, Nate. And Sammy can go ahead and go on to the next slide. And we're going to talk about, you know, how do you conduct a risk assessment, we've broken it down into kind of five phases, we're going to talk a little bit about each one of these phases in details. But what I want to point out up front, is that risk assessments are meant to be scalable and flexible, not any process is going to be a one size fits all, for every tech transfer office. You know, your approach, if you have 10 revenue generating licenses, or if you have 500, that revenue generating licenses is going to be different. Some people have lots of staff who are able to go through this process with them, some people have very limited resources when it comes to that. So this is a, you know, we talked about as a structure, and it's a framework, but it's flexible. And it can be as formal or informal as you need, depending on what your portfolio is, and what your objectives are. So we'll move on to the next slide and talk about you know, the first part of a risk assessment. Significant move, thank you, which is developing the approach that makes sense for your university. So you're gonna start is basically who's on the team, who from your office is going to is on the team? Who are your project sponsors? Are there other stakeholders like inventors or on management and things like that? Who needs to be on board with the project and involved in the process? And we're gonna give different insights along the way? You want to define your strategic objectives? You know, why are you doing a royalty risk assessment? Why is it important? Are you concerned about revenue leakage? Are you concerned about just not having a holistic view of who your licensees and your portfolio is really made up of? Do you feel like you need to dig in deeper into some of your more complex licenses, or just get a better understanding of the different things that are going on there? You know, while you go through that, you're going to define your risk factors and things that are important to you. And we're going to talk more about risk factors a little bit later. So I won't spend too much time right now on that. But you're also going to determine how are we going to collect our data, what's going to work for our team? To do this and how we're doing it internally, we're going to get some outside help to do that. Some things like you can use our surveys and questionnaires you can have group meetings and facilitated sessions. We're going to talk a little bit about how you can score risks later on. And then obviously, you want to define what your population of royalty agreements is. So how many licenses do you have? How many are royalty generating? And there's gonna be some different approaches to how you look at your portfolio, depending on how large it is. If you've got 10 revenue generating licenses, like I talked about before, that might be pretty easy, hey, we'll look at all 10. Because there's because we have the capacity to do that. If you have, you know, 500 or 1000 licenses, you might need to break that down and, and focus in more on which which licenses are going to be part of this risk assessments. And some of that criteria could be quantitative. So what's the significance of the annual revenue that we received from some of our licenses? You know, we're going to look at every license agreement that brings in more than $200,000 a year, for example, there might be some other qualitative based decision making tools that you can use, what's the history of the license? How long has it been around? What's our relationship like with some of these licensees? Where are they at in the lifecycle? Is it a brand new agreement? And do we want to do a health check on something that's very new? Is it very established? And we've never really looked? Or done an audit? And we're not really sure, you know, whether this licensee is reporting the right way? Are they nearing termination or patent expiration? Which can bring in some other unique risk factors associated with that? Are the agreements complex? And we feel like, Yeah, this is gonna be a good one to really dig into, and do an assessment on in this.

Speaker 2  21:22  
Just briefly on this? Yeah, you know, I think the qualitative and quantitative perspective, you know, of how you go through that, I mean, there's advantages and disadvantages, right, of each of those are things, you know, considerations that you have, and I mean, from the quantitative perspective, you know, it might be more efficient in performing a cost benefit analysis, right, and kind of looking at the dollars, and it, it does enable an allocation to business activities, where you can see the risk return, right, if you're focusing a lot larger dollars, I think some things to think about just through strictly that that model, you know, in focusing solely on the numbers, you can, you know, miss some of the qualitative impacts to be overlooked, right, that could be key. And then, you know, conversely, on the qualitative side, I think, you know, obtaining those critical non financial impacts, or, you know, making sure that those are taken into consideration gets highlighted from there. And it can be more easily understandable, organization wide, you know, what some of those factors are. Sometimes from the qualitative perspective, it's harder to demonstrate the cost benefit. You know, and going through as well. So, I mean, we see organizations that might do quantitative focus, qualitative, focused, or hybrid approach.

Unknown Speaker  22:50  
point eight, and then moving on moving on, Sammy to the next slide, you know, after you've kind of determined what your approach is going to be number nine to, to identify and measure our risk. So during that process, you can develop impact and likelihood criteria, depending on how you're going to look at your licensees, what you think your biggest risks are. And this is really the process where we collect and catalog our risk data. We're going to do our surveys and our questionnaires, we're going to have those discussions or interviews, and workshops and work through all of the external data that we might have from from industry. And we're going to talk a little bit more about those shortly. And then any internal data that you might have. So if you have a system where you track your license agreements, do you what kind of data can you get from that? Are you getting payment data, timeliness data, you know, what's what's on your system that you can utilize as part of your risk assessment process. On the next slide, we have an example risk assessment scorecard. And, you know, like I said earlier, this can be as informal or formal as you want it to be, your scorecard might not look as fancy and as colorful as the one that we have here. But the point behind it is the same as that you want to talk about think about what your risk factors are for each individual agreement, and kind of score those are in different ways it was different stakeholders who might have various perspectives, and so on, it's going to be customized for your types of licensees. Your risk factors for startup companies are going to be different than risk factors for large established agreements, or agreements that have significant foreign or multinational organizations. They can be customized based on industry specific agreements. So if you have a lot of pharmaceutical licenses, you might have risk factors associated with certain deductions like chargebacks. Or if you're deep into software, you might have risks that are associated specifically with how they're tracking license user and more on the test. Knology sides. What we have listed here are some of the PRS that we see a lot when we do royalty audits, and things like are there new products and activities related to the agreement? Have there been changes in third party personnel that might, you know, what make us more vulnerable to the to misstatements in the royalty agreements? Have there been recent amendments to the agreement is the agreement very complex. So you can kind of see some of those things that we think about the scorecard. Now, we also talked earlier about how we're going to use various sources and approaches to measure our risks, you might have some internal data from your systems, you can look at historical royalty reports to see changes in the sales value or changes in the format or the product that they're they're reporting payments, frequency and dates are as they're consistent late payments, or they're not submitting their payments, when they should be the length of the relationship and the transparency of your licensee when you ask them questions. patent expiration timeline, we see a lot of risks associated with patent expiration or for license agreement, termination considerations, things like sell off period of things that have already been manufactured. There's also a lot of observational and subjective data that you're going to be able to gain from the interviews and the discussions that you're going to have. And then external data, you can use industry and product trends, Better Business Bureau information, negative news, things like that. Nate, did you have anything you wanted to add to the slide? Yeah,

Speaker 2  26:47  
we're just going back to the risk factors. Liz, what what you're talking about, I think that what we've highlighted here are, you know, when we go out and do royalty audits, and we see the licensee is non compliant, what does that profile look like of the licensee, and oftentimes, we'll see that these are some of the attributes, you know, that they exhibit, either from an organization standpoint, or specifically managing, you know, and that drives non compliance. And so that's where, you know, I, we've given that example here, but you know, when you think about your licensees, and maybe some of the ones that are challenging or or things that, you know, you want to look across your portfolio and evaluate against, those are some of the things that are what's driving risk, you know, against each of those licensees, and that's what the risk factors are trying to get at. So that you can take this and apply it and be consistent, you know, across your portfolio.

Unknown Speaker  27:57  
And then, moving on to the next slide. So prioritizing the risks after you've gone through the process, where you've looked at those different attributes and thought about each of your agreements and done some, some risk scoring. During this part of the risk assessment process, we're going to evaluate which of our licensees seem to be riskier, from different perspectives. The graphic here is kind of a heat map, and it's showing, you know, likelihood and impact of certain risks. And what it does is it helps to kind of lay out visually, where risks are seen. And sometimes this can be very interesting, looking at a specific agreement that the licensee manager might be something that's very risky, while some other stakeholder doesn't have, you know, that same sense. So this can really help to kind of mesh those two perspectives together, and have those discussions and determine, you know, where the risk lies with certain licensees.

Speaker 2  28:59  
Yep. And was yeah, I'll just add in here, I think, you know, the visualization with the the heat map here can be be helpful. Bringing awareness internally. And, you know, what you said, it leads to some great conversations. I mean, when, you know, a lot of times to get some of this data to it's through the surveys, right. And, well, the compliance function thinks that, you know, XYZ licensee is high risk, and, you know, the licensee manager doesn't see that at all or, you know, the inventor doesn't see it, or faculty doesn't see it. So that makes great discussion points of why, you know, it might be divergent in assessment of the risk and help to right size, those, you know, across the portfolio. The visualization here, you know, I mean, when you think about impact and likelihood, you know, a lot of that drives if you think about overall non compliance, so we went through, you know, the risk factor On the prior slide, and, you know, what's the inherent risk over that? And that's the impact, right? So when you get to there and you aggregate all those, that's, that's the risk of non compliance. And you know, how significant that impact would be defining that criteria? And then the likelihood is, is, you know, how, how likely would that actually happen? Right? And what does that look like? So when when you're able to do that, from an impact and likelihood perspective, that framework can help drive, how you're going to prioritize risk and how you're going to prioritize your licensees.

Unknown Speaker  30:45  
And then on the next slide, see me? You know, and what we've done from there by having those discussions is we've basically summarized our risk results, we've agreed on them. And we've validated those results with key stakeholders that we've identified at the beginning for the license managers, legal inventors, faculty, and staff. And so from there, where you can really establish the accountability for certain risks, and licensees, by assigning people or groups to monitor those, using the certain protocols, depending on the risk level, and you might, you might have to segregate those as well. So you've got maybe high risk and medium risk and low risk. And there's only so many people that you have in so many hours in the day. And so now you have, you know, a structure and a framework for doing some monitoring activities that are going to focus on where the risks are and provide that time value that we've discussed before.

Speaker 2  31:49  
Yes, and I'll just jump in real quick here on this, too. I think this is just another data visualization. Right? So when you kind of think about your licensees and how they're presented to stakeholders, internally, you know, is there a concise, summarized manner that you can highlight your portfolio of what you have? And in how are you presenting that. So this is a way to do that, and highlight, you know, what, who the licensees are, and what the risk, you know, kind of profile for that looks like, and so, you know, once you start establishing this framework and approach, you know, if you've got quarterly touch points, or you look at this on an annual basis, you can look for trends of you know, are they changing different colors from green to yellow, or yellow to red, or, you know, maybe things happen, that you're able to move it from red to yellow. But really trying to get that holistic view brings a lot of great dialogue, but really also helps to align efforts of where we need to be spending our time kind of going back to that in the beginning, right, and making sure that it's a focused manner, you know, we don't have as much resources in time as we did before. So how are we going to do that in an efficient manner?

Unknown Speaker  33:12  
Good point, and to always be thinking about your risk assessments. You know, it's, it's not just a one time point in time, there can be changes over time, as Nate pointed out, so that, you know, the fifth step in the list assessment process is to monitor risk. So you know, now what, so we'd like to talk now about some internal monitoring considerations, and then external royalty audits if, if you ever need to utilize those. So on the next slide, we've listed out some internal monitoring considerations. Some of these things are fairly high level, you can do them with your heart whole portfolio, depending on how large it is. And then maybe some more specific or deeper dive into some monitoring considerations for your riskier licensees. These can be things like, you know, internal touchpoints, whether you're doing that on a quarterly basis, or an annual basis, to discuss your major agreements, any changes that are happening amendments, things that you're seeing in your day to day, you know, getting reports and things like that, to have an agreement calendar and track due dates of royalty reports, and whether you received them. Some of you probably have a system that's able to do that for you. So it's a great opportunity to utilize that to do some of the work for you. We find that having a central repository for your royalty reports that are incoming and the associated agreements, so that if there is a concern, you easily have access to royalty reports over time for that licensee, so that you can see whether there's changes and things look look strange or funny. And that you can dig into the agreements and see whether the things that they're reporting are in line with what your agreement says. Over they should be used for riskier licensees, you can utilize things like abstracting key terms and conditions for the agreement. Again, this is a system opportunity. And you can use that as a reference to review against the payments and invoices as they're received. Is this in the correct format? Does it look like they're adding products that we haven't heard of before? Do we need to ask additional questions about that, that kind of those types of things, and having ready access to those really helps to do that. Having a trend analysis for your agreement really helps us see increases and decreases in prices, mails, products, rebates, expenses, if you do have that sort of agreement, over the course of the life of the agreement. And then to have a process or budget to conduct internal or external audits as needed. And also the track amendments considerations for future reference. So when it comes time to amend the agreement, or or even to terminate the agreement that you have ideas and considerations that you would use to make that agreement better for the next time.

Speaker 2  36:12  
It was, yeah, just on that last one, right. Because I think sometimes it's hard to make amendments to get more transparency if if it's signed, or you might be inheriting an agreement from someone that's no longer there. So you know, some of those items were a it might be a Roger report template, right, that you can get more transparency, they might not adapt that if it's not in the agreement. So they're going about some of those with some of your legacy agreements. And are there things that you can add in for amendments when when those come up, you know, to help with with that transparency.

Unknown Speaker  36:53  
All right, and then on the next slide, and I will encourage you to use the q&a button. If you've got any questions or comments so far, we can go through those in a little bit. Next slide about you know, external royalty audits and how that process and approach works. So if you have a risky, you've identified a risky license agreement that you think there's issues with most, most agreements, we see have a right to audit clause. And so we wanted to kind of highlight what that process normally looks like, you've identified an agreement for audit based on certain risks or concerns or where they're at in the lifecycle, you issue an audit, notice, to put them formally on notice that you're going to do an audit in accordance with your agreement. And then that's where the audit planning and scoping really comes in. And that process should be flexible and scalable as well. You should develop procedures, with your third party royalty audit provider, that you go, that's going to discuss your risks and really create a plan that's going to align your expectations and define those key audit procedures. You know, to alleviate your concerns. Audit execution usually takes about, you know, eight to 10 weeks, I would say, depending on, you know, where the where the books and records are located. We do royalty audits, both remotely from our offices, or on site where the books and records are held. Nate, was there anything you wanted to highlight about this process?

Unknown Speaker  38:33  
Nothing specifically on this was

Unknown Speaker  38:36  
okay. And then just to kind of finish up the reporting and post audit resolution. So your audit report should detail all the procedures that were performed and what the results of those are. Nate talked about earlier, you know, 75 to 80% of the audits that we do do result in monetary non compliance. And on the next slide, we've kind of highlighted some common audit issues. And these are things you can also think about as you're doing your internal monitoring considerations, things like clerical errors. Over the years, I've been doing royalty audits for about 15 years. And I've had dozens of times where directly on the royalty report, there's a clerical error. That's that's pretty obvious. So just take a look at those and say, you know, does the math add up? Inconsistent agreement interpretation is a big one. We talked earlier about, you know, amendment opportunities, and this is probably one of the biggest areas where we see amendment opportunities. Is there language in the agreement that's, that's gray or it's not specific. And the two parties, you know, read it differently. foreign location considerations. Errors in recording deductions, like rebates and chargebacks. reconciliations of a cool form completed on time transfer pricing issues. So these are, you know, I'm not gonna read all of them. But these are the most common audit issues that we find.

Speaker 2  40:12  
Yeah, and I think those right, so some of the audit issues here, just a takeaway that I would say is, again, thinking about the audit issue that can about your licensees, you know, a lot of these can be converted to risk factors or to be baked in. Right, when, when you're assessing your portfolio and assessing risk within them. I think, you know, one of the things Liz was talking about the royalty audits, you know, for some of those, it could be us that are doing them, you might have the ability to do the royalty audit internally as well. You know, the right to audit clause dictates whether you need an accounting firm to do so, or not. If you think about it, you know, in going through that royalty audit, there's a lot of information that's learned about the licensee through that, that process. So, you know, it shouldn't just be doing the royalty audit, and then moving to the next one, you know, you need to update the risk profile for that licensee. So what's, you know, have the risk factors changed, if you found a lot of problems, right, it's, it might be a greater risk, and you got to stay in front of it. You know, if it came out relatively clean, you might be able to reduce the risk in the monitoring that you go through on that. And and I think, you know, just with some of the the royalty audits as well. And when you're thinking about that for higher risk licensees, or those that bubble up to that level, Liz mentioned, it's scalable and flexible, right. So for some of them, if it's not a high risk, you might decide to do a one year audit. And it depends on you know, what your your license agreement dictates of how long you can do that at higher risk one, you might do a longer audit period. You know, just to validate that, the accuracy of that.

Speaker 2  42:19  
And then, you know, I think with some of the other considerations of the internal versus external, you know, that that should be constant and how you're going through that. So even with a, we talked about royalty audits with this, I think there's other touchpoints that you can have with licensees to get awareness with them. And so some of those might be quarterly touchpoints, you know, if it's significant enough, but we talked about surveys before as well. And, you know, we talked about that from the context internally, of surveying, you know, people within the tech transfer office inventors, you know, faculty, you know, internal legal counsel, things of that nature. But it's a great opportunity, you know, when you think about your licensees to know more about them to survey them, you know, on an annual basis, and what's changed from them? Are the people that are preparing the Royals report changed. You know, have they had any key transactions, maybe any acquisitions, or dispositions that have impacted? You know, this or that? Are there any changes to their accounting systems that could impact the reporting? You know, are there new markets or new products? A lot of the items that Liz talked about, you know, those are great to survey there, and to be able to use that information to have follow up discussions with them, but then also update their risk profile.

Unknown Speaker  43:57  
lose any other considerations?

Unknown Speaker  44:01  
No, I think we covered it. So if anyone has any questions, we're happy to to answer those.

Speaker 1  44:12  
Hi, so while we wait and see if any questions come through, I think we've touched on a lot of this. But I always like to ask, if there's one major takeaway that folks should go home thinking about after this session? What would each of you think is the key piece to either bring back to the office and implement or be mindful of?

Unknown Speaker  44:35  
I would say to just think about the risks in your portfolio and start a discussion about it. Even if you don't get to a formal royalty risk assessment that takes into account you know, 50 other licensees have those discussions about what are we seeing? Are there trends here? Like are there problems that we should be monitoring a little bit more closely and What do we have system based that can help us do that? Easily? I think that's a great first step.

Speaker 2  45:08  
Yeah, and I think it's alignment of, you know, the strategy and objectives of the office to to the risks and, you know, upside risks and and things that could impede that. So what the licensees it provides that structure and that holistic view, you know, in doing a risk assessment, and so it's a different way to start thinking about things, but it's more proactive and forward looking. As opposed to reactive, and, you know, kind of just checking the rearview mirror of what happened and working through that. So that's, that's what I think it is, is trying to take, how managing licensees to the next level, and providing that structure and a mechanism to do so. Great,

Speaker 1  45:58  
thank you. Those were both excellent points. And, again, attendees, feel free to use the q&a button if you do need to submit anything. Any questions for our panelists, Nate? And was, this might be similar to what I what I just asked. So if it is we can move forward. But are there common questions that you all hear a lot from doing sessions like this, that maybe we didn't touch on? Maybe to anticipate some questions while they're getting submitted? And I know, it's a lot of information for attendees to digest and put together quickly into question. So, I guess, I mean, yeah, I

Speaker 2  46:36  
mean, some of its, I think, how to get started with this, right, just because it could be conceptually a different topic. And so I think a lot of that is, you know, getting smart on risk assessment, and this is an introduction to that. But, you know, working through and defining what a lot of this is, right, so, we talked about impact and likelihood, we talked about risk factors. And, you know, we talked about, are they a higher risk or medium risk or low risk? And so I think, a lot of those concepts, you know, need to make it unique for your office and specific for your office. So what is high risk mean? What does, you know, medium risk mean? And what does low risk mean, and if you can define those criteria, that will drive consistency within the office, for people to evaluate things in a similar manner. And so that that consistency can help drive actions and focus are where they need to be. So I think defining the framework can be helpful, so that it's structured, you know, as you go through this process.

Unknown Speaker  47:54  
Excellent. Liz, anything you wanted to add on to that piece? Or does that cover that for you?

Unknown Speaker  48:00  
Oh, you know, I think made cover, I would also say, you know, to define what your portfolio is? And is there certain categories or subcategories that you should start thinking about your portfolio in? Do we have, you know, if we have 100, licensees, which ones are startup companies that might not need our focus right now. But we should still think about what those risk areas for them will be as they grow? How much you know, further our revenue generating licensees, how much are we getting every year? And does that does that changing over time? Is that specific that might, that might be another bucket? And maybe we've got a bucket of for certain industries, maybe these are pharmaceutical licensees, and these are more of our manufacturing, product licensees. And so think about your portfolio in different ways. Because each one of those types of agreements is going to have different types of

Speaker 2  48:53  
risk factors. Yeah, I think that's a great point, Liz, because, you know, segregating the portfolio, just with the number that that's in there of licensees, right, it looks different. And when we think of startups, I mean, they're an animal in its own in going through and just because they're non compliant with the monetary considerations. That might be okay. It might be the business decision, right. And so, you know, we're looking to create jobs for for the technology commercialize the products and, and so that risk level might be less than if you think about a fortune 100 large pharma company that you're working with it and how you're targeting that. So I think that's a great point of, you know, how do you view the licensees within the organization, right, and how do we categorize and bucket ties those whether it is the startup to non startup, you know, if you're looking from software to pharma, to AG to to whatever the case may be epic tearing it that way. And, you know, I think Ben did If not benefits of doing that way is just trends, right? So if you've got like minded individuals focused on just startups or you know, just industry, sharing that knowledge of what you're seeing around the licensees can be a creative just to the risk management process.

Speaker 1  50:20  
Awesome. Thank you both. It looks like I'm seeing other questions come through, which is more than okay, I know we covered a lot today. I'm going to quickly straight screen share once again with me and was his contact information while I go through some final housekeeping notes. So on behalf of autumn, I want to thank you both for this informative discussion. And thank all of our attendees for joining today. As a reminder, a recording of this webinar will be available for viewing on the autumn Learning Center within a few days of this session and is included in your registration and a PDF handout of the presentation with me and was his contact information and all these great resources will also be available for you in the autumn Learning Center. Please remember to complete the webinar evaluation which will open when you close out and you'll also receive a follow up email tomorrow with a link to complete that survey. It's very brief and helps us serve your needs in the future. And again, thank you so much for joining and spending your afternoon with us and Nate and Liz, thank you again so much for joining us. I hope everyone has a great rest of the day.

Transcribed by https://otter.ai