Managing Assets or Asset Management?

Original article by FMI Works Strategic Asset Management Director Ian Jackson.

A Shift in Facilities Management

Traditionally, facilities management is perceived as exclusively managing the day to day to keep facilities running. This is increasingly no longer the case.  

Over the past few years, facilities managers are increasingly expected to move from a day-to-day reactive mindset, to a business-oriented, proactive, whole-of-life approach.  

As complexity increases, the need for robust data analysis, business intelligence and reporting capabilities also increases. Decisions are expected to be well-informed, and these tools are critical to basing decisions on quality data.

Budgetary decisions are made by business analysts and C-level executives; people who have historically been very much “hands-off” in the management of an asset.

Emerging Market Trends

Both public and privately funded organisations are increasingly focussed on asset performance, in the context of service level agreements (SLA’s).

Victoria’s Department of Treasury and Finance established the Asset Management Accountability Framework (AMAF) in 2016. Developed to replace the previous “Sustaining Our Assets” policy statement, the change inspired similar initiatives in other states.

The purpose of Victoria’s AMAF is to ensure that assets are optimised for everyday Victorians to extract maximum value.

Built around key success criteria, the framework outlines a standardised level of service and quality for public assets. Including guidelines for asset acquisition, holding, usage and disposal processes, it ensures associated costs and risks are managed efficiently and effectively.

New South Wales responded to Victoria’s framework in 2019 by developing its own Asset Management Policy. The purpose being to drive “better asset management through strengthening accountability, performance and capability across the public sector”.

Replacing NSW’s existing Total Asset Management policy, the new policy is driven by asset lifecycle factors. Including cost, performance, risk and economic modelling.

Similarly New Zealand operates under a policy where publicly funded organisations operate under an Investor Confidence Rating (ICR). The ICR is a treasury-led, three-yearly assessment of government-funded services. Its purpose is to rate the performance of each agency in service delivery, and the likelihood of service continuance.

These emerging regulatory frameworks are changing requirements and expectations in the industry in both the public and private sectors. Increasing the pressure on asset owners for accountability for how assets are managed, and how they deliver required service levels.

Managing Assets or Asset Management

Managing assets involves what you do to assets. When focusing on managing assets, departments may identify expected expenditure over the next period on their assets. Whilst important, that figure has more to do with near-term expenditures than with strategic business considerations.

It is possible to extract greater value from day-to-day management of work orders and other asset-orientated activities. Exploring possibilities within the context of organisational purpose, objectives and strategy, is the first step towards asset management.

Asset management has a broader focus than managing assets. This strategic approach encompasses different organisational levels, and applies to all functions to extract maximum value for stakeholders.

Why Should I Care?

Thorough and proactive asset management is recognised a function that significantly impacts service delivery effectiveness. The success (or not) of convincing authorities with credible requests for funding should be front-of-mind for all stakeholders.

Often, funding bodies require objective evidence illustrating that decisions about all aspects of asset ownership are made with service delivery in mind.  This evidence is often sought via an assessment of the asset management framework in place.

Asset owners are often accountable for the delivery of asset management. This drives a need to demonstrate that activities have been made using credible and defendable decision making.

Senior management and boards are accountable for these outcomes. This accountability necessitates having appropriate policies, procedures, and enablers to consistently manage and report on assets in their care.

Prepare for the Future

To realise the full value from assets, sustain service delivery objectives, requires good asset management practices. That is, activities applied over the whole of the asset’s lifecycle.

Lifecycle management, accurate budget forecasting and asset optimisation are critical. Informed decisions require an understanding of the forward liabilities and risk to business operations presented by those assets. This strategic management function is currently either largely under-resourced or outsourced to external consultants.

Sapphire gives control back to asset owners through simple, yet effective tools. This easy-to-use platform enables asset managers to develop forward-financial capital forecasts, risk profiling and control asset optimisation. A cloud solution, Sapphire projects and manipulates an assets lifecycle, looking into the future, and forecasting the needs of an asset.

In delivering organisational outcomes, Asset Management and Managing Assets are not alternative approaches. Rather, they complement each other to make better informed lifecycle management decisions. Getting this right will help you succeed as an organisation and keep the press away from your door!