Effective asset management is the coordinated activity of an organisation to realise value from its assets and is dependent on accurate, up-to-date and quality asset information. This requires asset management to interact with many functions and departments of an organisation as assets can touch many areas.
During an industry benchmarking study by a prominent asset management consultancy for a large utility organisation, it was determined that the cost of the asset management system made up only 3% of industry cost. However, the activities and decisions generated impacted at least 82% of the industry’s total costs.
Effective asset management; Governance, Risk and Compliance (GRC)
A sustainable GRC organisation should have a framework and management structure which include clearly defined roles, responsibilities, activities and systems to analyse and manage each recognised aspect of GRC.
The objective is to transform these activities from a costly burden into a strategic management tool, enabling the company to respond flexibly and effectively to changing stakeholder demands and lay a strong foundation for business success.
The five primary risks to effective asset management
1. Not knowing what you have
In common manufacturing industry jargon, this is known as the FDH (Fat, Dumb and Happy) approach to asset management. While it might seem intuitively obvious, many organisations either don’t appreciate the need to know with a high level of confidence, the assets that they have or they choose not to take the time to do so.
2. Over or under maintenance
During the operational phase of the asset life cycle, there can be a problem of over maintaining as well as under maintaining. The key issue regarding maintaining typically involves two issues that will make the asset management system ineffective.
Firstly, there is generally a significant cost associated with the execution of non-value-added maintenance. In this regard, the cost can be loosely used as a guideline since there are well-documented industry benchmarks for maintenance spending that can be followed.
Secondly, the typical organisation that can be accused of over-maintaining its assets will most likely be performing intrusive maintenance tasks more frequently. From what we know of how typical failures manifest, this means that there will be additional exposure risk for the business to infant mortality failures and further incurred costs.
The issue of under-maintenance and how it prevents effective asset management is even more clear-cut. Maintenance is often viewed as a business expense open to cutting like any other to maximise profits. With these pressures, maintenance departments are constantly struggling with how to balance cost with the performance requirements for the assets such as reliability and uptime.
3. Improper operation
Many organisations suffer first of all from a lack of understanding of the inherent design capabilities of their assets and secondly, how best to operate within their ranges to optimise the asset life cycle. For some assets, either operating below or above the design range adversely affects the life of the asset.
4. Improper risk management
The basic tenet of best practices asset management dictates that a plan is implemented that not only manages the operation and maintenance of an organisation’s assets but also manages the risks associated with the ownership and use of the assets.
Risk, in its most elementary form, is a function of consequences and the likelihood of such an event taking place. Risk management takes place on two major fronts: 1) assessment or identification; and 2) management and controls. Each area, when not done well, is a continued contributor to ineffective asset management.
5. Sub-optimised asset management systems
Enterprise Asset Management (EAM) systems, in recent years, have become more popularly used within medium to large organisations to manage assets. Some systems have inherent deficiencies that prevent holistic management of all the required areas of the plan. That being said, of the features that are available from most EAMs, many organisations are guilty of not fully utilising them.
Getting it right the first time takes planning, resources and treating the implementation as a major change program and not just a project. This is easier said than done and is often best when supported by the services of change management professionals and asset infrastructure specialists.
We often fail to recognize that our human resources and business processes are important parts of an organisation’s asset management system. A lack of due diligence in these areas will also negatively impact the bottom line and should be planned for as well.Life Cycle Engineering
The value of effective asset management
Improved financial performance: improving the return on investments and reducing costs can be achieved while preserving asset value and without sacrificing the short or long-term realisation of organisational objectives.
Informed asset investment decisions: enabling the organisation to improve its decision making and effectively balance costs, risks, opportunities and performance.
Managed risk: reducing financial losses, improving health and safety, goodwill and reputation, minimising environmental and social impact, can result in reduced liabilities such as insurance premiums, fines and penalties.
Improved services and outputs: assuring the performance of assets can lead to improved services or products that consistently meet or exceed the expectations of customers and stakeholders.
Demonstrated social responsibility: improving the organisation’s ability to, for example, reduce emissions, conserve resources and adapt to climate change, enables it to demonstrate socially responsible and ethical business practices and stewardship.
Demonstrated compliance: transparently conforming with legal, statutory and regulatory requirements, as well as adhering to asset management standards, policies and processes, can enable demonstration of compliance.
Enhanced reputation: through improved customer satisfaction, stakeholder awareness and confidence.
Improved organisational sustainability: effectively managing short and long-term effects, expenditures and performance, can improve the sustainability of operations and the organisation.
Improved efficiency and effectiveness: reviewing and improving processes, procedures and asset performance can improve efficiency and effectiveness, and the achievement of organisational objectives.
For more information view the eBook: Hardcat Asset Governance, Compliance, Risk and ISO 55000
Effective asset management is an integrated approach to optimising the life cycle of your assets, tools and equipment, beginning at purchase through to usage, decommissioning and disposal. By acknowledging and paying attention to the above mentioned ‘five primary risks’ to effective asset management you can put in place plans to mitigate the effects.
- Increase stakeholder and asset value
- Meet GRC objectives and plan with consistency across the entire organisation
- Keep customers and other stakeholders happy
- Recognise the need to replace/refurbish assets when they reach the end of the life cycle
- Identify and evaluate the unusual performance of assets
Why you should talk to Hardcat about an ISO 55000 audit
Receiving certification “ups the ante” for the discipline of asset management and provides a clear and highly visible benchmark for good stewardship.
While certification is likely to be attractive to only a small subset of organisations, Hardcat recommends that all asset-intensive organisations at least spend time to understand the content of these standards and how well their practices align to them. Read more on Asset management services ISO 55000 compliance audit