The Sydney Chapter recently ran a one day symposium on the topic ‘can organisations afford not to be using Asset Management?’
The format of holding a one day symposium was relatively new for the Chapter. The committee believed that the combination of world class speakers and the topics covered would be sufficient to warrant a day long event and this proved to be the case with over 60 people present on the day. A survey of participants found that most believed it was highly worthwhile and, as one participant stated, “broadened their view of how asset management fitted into the bigger picture of organisations”.
The opening speaker was Matthew Roberts, Deputy Secretary with NSW Treasury. Matthew explained the difficult fiscal context that faced NSW with both expenditure exceeding income and the increasing demand for capital expenditure. He elaborated on the important role the newly formed Infrastructure NSW provided in guiding capital investment. The outcome is that agencies requesting capital and maintenance funding for infrastructure must compete on the basis of the asset management plans they prepare. Those agencies less able to demonstrate sound arguments in their asset management plans would face difficulty in funding allocation.
Grant Purdy, the Chair of Standards Australia on ISO PC 262 Risk Management, showed how risk management can be practically handled in making decisions. Grant dispelled the myths that the concepts of ‘risk appetite’ and ‘risk tolerance’ were useful for organisations to make risk based decisions. He argued that ‘risk attitude’ was a more appropriate technique. Grant both demonstrated the importance of risk management in making decisions regarding physical assets and also that there was still confusion over what risk management was. He effectively raised doubt in the audience that organisation’s clearly understood or managed risk.
John Hardwick provided his considerable experience of working with Boards and in particular advising them on asset management investments. He explained that many Boards focus on financial matters and risk, both of which had been covered well by the previous speakers. John stated that “if you can’t articulate the impact of any change, say a 10% reduction in your budget, then you’re not doing your job as asset management professionals”. He elaborated that increasingly Boards and regulators required sound information and analysis to support decisions regarding assets. He demonstrated how such evidence has been successfully used by Boards in making critical decisions and discussion with industry regulators.
John was joined by Peter Way and Peter Kohler in an update on the new ISO Standard for Asset Management based on their participation in the international conference in Washington. Australia is certainly well represented with 6 of the 8 international task groups being led by Australians. The Australian proposal to limit the scope of the standard to only ‘physical assets’ was unsuccessful. However this has been addressed by the inclusion that each organisation is required to state the scope of assets they are applying the standard to.
Valter Loll, Chairman of TC56 IEC Dependability International Standards, explained the suite of standards that are covered by the ‘Dependability’ umbrella with the IEC. They include an extensive set of standards based around RAMS developed for industries such as electrical, software and manufacturing. All of which appear to be useful with the asset management framework. Valter explained that some of the most exciting advances were occurring around software and networks. He successfully explained that rather than being in competition with the ISO approach the IEC Dependability Standards were compatible and indeed necessary companions. Indeed it became clear that anyone practicing asset management would need to be familiar with the IEC Standards and be able to use them as part of their ‘tool kit’.
Thomas Van Hardeveld, the Canadian TC56 liaison representative on the ISO Asset Management Standard, also provided his views on the ‘fit’ between the IEC Dependability set of standards and ISO Asset Management. He explained that if ISO is considered the ‘top down’ approach to holistically managing an organisation’s assets then IEC can be considered the ‘bottom up’ tool sets which support the key decisions i.e. one deals with a management approach whereas the other is a set of detailed technical specifications to be used in achieving that approach. The other differentiator is that ISO appears to encourage certification, whereas IEC standards are not for certification but rather are referenced in contracts.
In summary organisations are increasingly utilising asset management techniques to make critical decisions regarding how assets support achievement of their objectives. Using such techniques is expected, and in some cases mandated, by funding organisations (e.g. NSW Treasury), insurance underwriters and regulators. Boards making decisions on asset investment and maintenance require sound financial arguments built up from solid asset information and analysis. Understanding risk management and current practice on international standards informs those decisions.