Looking after power stations, water treatment works, railway lines and other major physical assets is fast becoming a job for employees across entire companies.
Sharing information or using technology to better analyse the risks and requirements of every asset are increasingly the concern of those sitting at the very top of the company – not just the expert asset managers.
With better use of data on physical assets, for example, companies could cut the lifetime cost of assets by as much as a fifth, according to professional services firm PwC.
These are the sorts of savings that catch the eye. Good asset management means assets perform better, risks are managed more effectively and regulators are happier, says PwC.
The growing importance of quality asset management was highlighted in January when the International Standards Organization launched ISO 55000.
The new standard replaces the British Standards Institution’s PAS 55, which was adopted internationally by manufacturing, utility, mining and transport companies. ISO 55000 also has international force, but has wider horizons, to include financial as well as physical assets, and is becoming a hot topic of debate among asset managers around the world.
Good asset management means assets perform better, risks are managed more effectively and regulators are happier
In the words of the Institute of Asset Management, which spearheaded development of ISO 55000 in the UK, the new standard creates “a global consensus on what asset management is and what it can do to increase value generated by all organisations, at a time when everyone needs to make the most of any resources they have”.
Effective asset management is simply the best way to optimise the value of your assets, according to Daniël Pairon, global head of asset management at KPMG, the professional services firm.
“If you implement an effective asset management system, you will generate value for the bottom line, not to mention lots of non-financial benefits,” he says.
“Bottom line” and “value” are the sorts of words that company bosses want to hear. Equally, they want to hear about the tangible non-financial benefits of having effective asset management practices, such as strengthening their brand and improving their company’s reputation among customers and regulators.
Listed companies with effective asset management practices can tell shareholders about the value they are adding to their business and, ultimately, how these practices are making good their investment.
Mr Pairon, who was a member of the committee which developed the ISO 55000 standard, says it should help expand good asset management practice well beyond the remit of engineers and technicians to all corners of a company.
A survey by the Infrastructure Asset Management Exchange (IAME) suggests that half of asset managers intend to invest in an ISO 55000 or other certification in the next 12 months. Some companies have already done so, including one of the UK’s biggest utilities.
Scottish Water was the first company in its sector to receive a rubber-stamping for its adherence to ISO 55000. Robert Doughty, quality manager at the utility, says certification allows the company to demonstrate to customers and regulators that it has achieved a high level of professionalism in the way it manages its assets. This ultimately helps it to produce clean drinking water and treat waste water in a safe and efficient manner.
Geoff Aitkenhead, Scottish Water’s director of asset management, says certification brings a “clear alignment” between the strategic direction of the company and the management of its assets.
The IAME survey also shows that the number-one concern of asset managers is investment planning, with just over half of those surveyed citing it as a priority for the next 12 months. Half say they intend to invest in life-cycle modelling and tools for assessing the integrity and condition of their assets.
Increasingly, asset managers want greater integration with finance departments. “More and more chief financial officers are becoming interested in asset management,” says Mr Pairon. “They want to have an in-depth understanding about maintenance and other costs.”
Improved management of the life cycles of assets and benchmarking their performance against other companies are also high on asset managers’ agendas, along with assurance or ensuring compliance with local and national regulators.
However, balancing budgets for the day-to-day maintenance of assets and their longer-term strategic requirements will be a key priority for asset managers when budgets are limited. Asset managers may end up asking themselves: “If I have to make a choice, where am I going to spend my last pound?”