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Asset management - Protecting what’s important

John Nelson FIIRSM shares his approach to asset management

Asset management refers to systematic and coordinated activities and practices through which an organisation optimally manages its assets and their associated performance, risks and expenditures over their lifecycle to deliver the organisation’s strategic plan. Historically the term has been commonly used in the financial sector to describe people and companies who manage investments on behalf of others.

Asset managers are increasingly focusing on risk management and adopting risk measurement and risk reporting strategies. But on top of implementing these basic measures, there is an eagerness to make risk management more actionable.

As the landscape of risk management continues to change, risk managers have found traditional models for calculating and evaluating risks to be insufficient. One of the current macro trends in the industry is establishing new frameworks and models. This assures practices keep up with the volatile and nimble landscape of asset management.

Robust risk

“Several years since I first acquired the responsibility of asset management, my organisation made a commitment to deliver solutions with accountability and commitment from the creation and acquisition of assets through to the ‘operate and maintenance’ phases,” explains John Nelson FIIRSM.

His organisation was always looking to optimise the performance of the asset. To deliver this effectively and efficiently the organisation required a fit for purpose and futureproof asset management system. The system was to be implemented at all stages, from opportunity and planning for risk management through to creation and acquisition of the most appropriate assets.

“This was to allow the business to meet its legislative, contractual and other requirements across the portfolio,” he adds.

The organisation’s asset management system had to demonstrate that it had the key features required for it to be robust, that it had been correctly implemented by all parts of the business and that it was delivering the required output to meet the organisational strategic plan. This was along with increasing the organisation’s ability to consistently provide energy solutions to its clients safely, reliably and responsibly.

Effective and efficient asset management requires a continual process of learning and improvement; “therefore the organisation identified a level that was sufficient to meet the requirements of the PAS 55 Asset Management Specification for the optimised management of physical assets as our first key milestone,” explains John.

Pre-ISO 55001, PAS 55 was developed by the Institute of Asset Management (IAM) and published by the British Standards Institute (BSI), and at the time was accepted worldwide as ‘good practice’ guidance for optimising asset management systems and processes and reducing risks to people, the environment and the business. PAS 55 provided a set of requirements for asset management across asset intensive organisations and industry including the energy and transport sectors.

“At that time, it was eagerly anticipated that PAS 55 would be accepted as an ISO,” explains John, “therefore increasing the credibility of compliance, particularly as risk management is a fundamental cornerstone of PAS 55.”

Case study

In the first instance the organisation conducted a high-level asset management assessment to determine the capability and maturity using the Asset Management Excellence Model™ (AMEM), recognised as one of the world’s leading asset management assessment methodologies.

“The high-level assessment provided the recommended improvement initiatives that were accepted as the asset management objectives,” John continues. “The observations on the status of the organisation’s asset management practice (such as processes, asset data, and information systems etc), were analysed as the gap between the current status and delivery of the strategic objectives.”

The comprehensive assessment was based across 23 subject areas concerning asset management, and to achieve compliance with PAS 55 using a maturity scale, a minimum of 45% had to be achieved.

The immediate benefit of this approach provided the organisation with:

  • an objective and clear view of organisational strengths and weakness without bias
  • identification of internal areas of excellence
  • identification of applicable external good practice
  • a gap analysis against and certification to PAS 55
  • a prioritised list of activities requiring improvement
  • tangible evidence to support decisions for enhancing the organisation, systems, process, procedures and risk culture.

The findings from the assessment were summarised across the asset management activities and defined the organisation’s capability.

Target capability

Maintaining an efficient and sustainable deployment of assets, with a robust systematic risk-based regime, requires a well-developed capability in asset management (including people, processes, technology). This is then reflected in assets that are performing optimally for the level of funding available.

Asset management to the organisation is fundamentally about delivering the outputs guaranteed to clients and other stakeholders, in a sustainable way, for the lowest whole life cost while creating revenue and tackling fuel poverty through the provision of sustainable energy solutions.

“Overall the benefits of compliance with the requirements of PAS 55 provided the organisation with demonstrable evidence for the implementation of an asset management system that supported the delivery of the organisational strategy, objectives and management of risks,” says John.

This included the creation of a ‘line of sight’ between the strategic objectives and implementation of plans and capabilities to deliver year-on-year acceptable and sustainable performance. This demonstrated to stakeholders that activities were being undertaken at the lowest whole lifecycle cost and risk.

Risk governance

The business invested and conducted an organisation- wide audit to assess the implementation and effectiveness of the recommended improvement initiatives identified during the high-level asset management assessment.

“It was pleasing that in line with the Risk Governance Framework the audit confirmed the practical approach to risk management, the implementation of risk management activities and how risk was controlled in order to achieve optimal asset management within the parameters of the legislative, contracted and guaranteed level of demand and service,” recalls John.

The favourable outcome of the audit not only provided the assurance of how risk was being managed but also confirmed the desired strategic objectives were being delivered, including:

  • a whole lifecycle approach to planning asset investment and management decisions
  • balancing the needs across the asset system (including assets owned and not owned) and selecting options which best met the contracted guaranteed outputs and ultimately the organisational desired strategic wanted outcomes and results
  • monitoring, evaluating, learning and improving demand and service
  • managing the risks of asset ownership and operation to ensure continuity of demand and service
  • adopting a continuous improvement approach to asset management policies and practices.

Focus on achievements

To achieve the desired intentions, John’s team placed an increased emphasis on the following:

Optimised performance: this should form the basis of all asset management decisions. The output and optimised performance needs will inevitably address the social, environmental and economic needs of all our stakeholders.

Whole lifecycle approach to asset management: evaluate the operating and maintenance requirements, and the implications of eventual replacement and disposal of assets, during decision making. The asset validation process evaluates sustainable alternatives for the delivery of the wanted outcomes and results for our stakeholders.

A risk management approach to asset management: inclusive of an informed stewardship, governance and ethical decision-making process. Subsequently it is driven by a fact-based value chain examining the total asset base during decision making of risk versus reward.

A dynamic approach

So what does this mean in the context of PAS 55? “We had to be clear and demonstrate what activities were outsourced, what was to be kept in-house and the decision-making process for doing so,” explains John. “The supplier relationship management approach was therefore reflected, to sensibly and responsibly manage risk, cost and performance management.”

The process defined by John is intrinsically linked to the innovative and dynamic process approach for conducting management reviews that also uses ISO10014. Dedicated meetings were not programmed into a ‘meeting schedule’ – “the preference was that senior management teams were required to ensure that all relevant items were reviewed at regular intervals as part of other meetings and processes,” he says. “This ensured a much more effective and efficient process that also demonstrated an integrated and demonstrable approach to managing the risk throughout the business, as business usual activity.”

Every stage in the journey gives you increased control over your assets and therefore greater capability to manage the risks that are inherent to your assets, enabling you to be in the driver’s seat of your asset base and define which direction it is going.