The second capital risk involves a company's human capital. Companies hire people with skill sets they need. Then they train them. Like physical assets, their knowledge becomes capital that can become obsolete as technology or business needs change, Klepper explains. And people can leave the firm, taking their knowledge with them.
Turnover is a human capital risk.
The third capital risk involves knowledge capital. Klepper defines knowledge capital as the information the organization uses to make good business decisions. Knowledge capital is not inherent in one person. Knowledge capital becomes obsolete when economic conditions change or key people leave. Klepper says buyers who outsource shift much of these risks to the vendor.