Developing an asset management philosophy

By David McKeown – CEO, Institute of Asset Management

David McKeown

When you look at the way your organisation manages its assets, what are the first questions that occur to you? Are you asking: “How can we improve the efficiency of our asset management systems and processes?” Or are you asking: “Why are we managing these assets at all?”

Many organisations treat asset management as an operational issue, rather than a strategic one. As a result, they don’t have a clear idea of what their assets are for. They manage their assets because the assets are there to be managed – and by failing to ask why, they fail to realise their true value and derive maximum benefit from them.

One of the main reasons for this is that different types of assets have different types of value. For example, a turbine in a power station directly contributes to an energy company’s bottom line, but a public park’s value to its local community cannot easily be measured in financial terms. As a result, a one-size-fits-all approach to investment and maintenance policies may not deliver the best results in every case.

At the Institute of Asset Management (IAM), we have been working with our partners around the world to create a new international standard – ISO 55000 – that not only sets out the requirements for good asset management practice and the guidelines for successful implementation, but also provides a broader overview of the principles, culture and philosophy that organisations need to take on board if they are to extract best value from their assets.

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I’m sure that many organisations will adopt the new standard, and that their operational approach to asset management will improve as a result. But if they treat ISO 55000 compliance as a box-ticking exercise, rather than an opportunity to fundamentally re-evaluate their business strategy and implement a directly related asset management strategy, they will miss the main point.

True best practice in asset management means not only putting efficient systems and processes in place, but also creating an organisational culture that understands the strategic role that assets play, the value they can deliver, and the risks they pose – right up to the board level.

This can be a difficult concept to sell to busy senior executives, who may be reluctant to take on direct oversight of yet another area of responsibility. But if there’s a lack of understanding at the top management level of the risks and opportunities offered by their major assets, the consequences can be disastrous: the Gulf of Mexico oil spill is just one recent example.

Even in less dramatic circumstances, creating closer links between asset management and other areas of the organisation often results in significant advantages. For example, in many businesses, the finance team is responsible for assessing the value of the company’s assets on the balance-sheet. But if they don’t know that certain assets need maintenance or replacement, their valuations can be wildly inaccurate.

Raising the profile of asset management and promoting an understanding of how asset management affects other business activities may be a long journey. Nevertheless, it is a journey worth making – and with the right support from bodies like the IAM, from vendors and from communities of practice, we hope to see a new paradigm for asset management emerge.

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