According to Wikipedia, Asset Management is a systematic approach to developing, operating, maintaining, upgrading, and disposing of assets in the most cost-effective manner including all costs, risks, and performance of assets.
Asset management is a process of governance and realization of value from the things (assets) that an organization holds or responsible for, over their whole life cycle.
The assets can be tangible (buildings or equipment) or intangible (human capital, intellectual property, or financial assets).
There are a few factors which can influence the type of assets of an organization, required to achieve the objectives:
- Nature and purpose of an organization
- Objectives of an organization
- Financial limitations and Regulatory requirements
- Needs and expectations of an organization and its stakeholders
These influencing factors are considered when there is a need to establish, implement, maintain, and improve enterprise asset management.
There is a need for effective control and governance of assets to achieve the desired balance of costs, risk, and performance of the assets.
What is an Asset?
An asset can be anything, item, or entity that has the potential to provide its actual value or worth to the organization.
In other words, the asset can be any resource with the economic value which an organization owns with the expectation that it will provide a future benefit. These assets are reported in the balance sheet of an organization that is created to increase the organizations' value or benefit the organization's operation.
Benefits of Asset Management
Asset management allows the organization to discover the value from the assets with respect to the organization's objectives.
Asset management assists the realization of asset value, balancing all the financial, environmental, social costs, risks, quality service, and asset performance.
Here are a few benefits of enterprise asset management:
1. Improved Finances
Asset management can improve return on investment and reduce the costs without giving up on short and long-term realization of organizational objectives.
2. Improved Asset related Decisions
Asset management allows the organization to improve its decision making and effectively balance the costs, risks, opportunities, and performance.
3. Risk Management
The managed risk will reduce financial losses, improve the health and safety of assets, less environmental and social impact will result in decreased liabilities like insurance premiums, fines, and penalties.
4. Improved Services and Outputs
Proper management of assets assures the performance of assets leading to their improved services and efficient product demand or the expectations of the customers.
5. Demonstrated Social Responsibility
Asset management demonstrates the social responsibility of reducing emissions, conserve resources, and ethical business practices.
6. Demonstrated Compliance
Demonstration of compliance can be enabled by strictly obeying legal, statutory, regulatory requirements, and following the enterprise asset management processes, standards, and policies.
7. Enhanced Reputation
The reputation of an organization can be increased by increasing customer satisfaction, stakeholder awareness, and confidence.
9. Improved Organizational Sustainability
Effective management of short and long-term effects, expenditures, and performance can enhance the feasibility of operations in an organization.
10. Improved Efficiency and Effectiveness
Proper improvement in processes, procedures, asset performance can improve the efficiency and effectiveness of asset management.
Overview & Objectives of Enterprise Asset Management
Members of an organization (decision-makers, employees, and stakeholders) should implement planning, monitoring activities, and control activities (policies, processes, monitoring actions) to utilize the opportunities and reduce the risks.
As asset management involves the balancing of costs, opportunities & risks against the performance of assets, it will achieve the objectives of an organization.
Asset management allows the application to manage an asset over the different stages of the asset life cycle from the need for an asset, its disposal, including its managing of the potential post and disposal liabilities.
Asset management is based on the set of few objectives:
1. Value of Asset to the Organization
The existence of any asset is described to provide value to the organization and its stakeholders.
Asset management does not primarily focus on the asset but rather on the value of the asset that it can provide to the organization. The value of the asset can be tangible, intangible, financial or non-financial which will be resolved by the organization and its stakeholders, according to the organization's objectives, which are:
- Asset management objectives aligned with organizational objectives.
- Use of life cycle approach.
- Initiation of the decision-making process.
2. Alignment of activities
The transfer of organizational objectives to technical and financial decisions, plans, and activities.
The technical, financial, and operational decisions of asset management allow the achievement of the organizational objectives, including:
- Execution of risk-based, information-driven, planning and decision-making processes and activities.
- Integration of enterprise asset management processes with functional management processes (like finance, human resource, information system, logistics, and operations).
- Execution of specification and design of supporting asset management.
3. Leadership at work levels
Leadership and workplace culture are determinants of the realization of value.
Leadership and commitment from all the levels are necessary for a successful and established asset management within an organization.
- Defined roles, responsibilities, and authorities.
- Employees should always be aware, competent, and empowered.
- Regular consultation with employees and stakeholders.
4. Assurance of effective growth
Asset management assures the fulfillment of the required purpose.
There is a need for assurance as there is a need for the effective growth of an organization.
Assurance applied to assets, asset management, and asset management system includes:
- Execution of processes that are required according to the organization's objectives.
- Execute processes that assure capability across all life cycle stages of assets.
- Process execution for monitoring and continual improvement.
The relationship of the Asset Management System to Asset Management
The asset management software is used by any organization to direct, coordinate, and control asset management activities. It provides improved risk control and assurance for the achievement of asset management objectives.
It is not always that asset management activities formalize an asset management system.
Leadership, culture, motivation, behavior are significant aspects to influence the achievement of asset management objectives or possibly managed by the organization using outside arrangements.
The asset management system is a set of interrelated elements that establish asset management policy, asset management objectives, and processes to achieve those objectives.
Whereas, asset management is a coordinated activity of an organization to realize value from assets. And assets are the scope and focus of the asset management system.
Asset management is the activities coordinated by an organization to realize the value from their assets, and the related activities like asset management policy, asset management objectives and its processes together constitute and work as the asset management system.
For asset management to work efficiently and effectively elements and fundamentals are required. They assist and make any process to come together and work smoothly.
Therefore, asset management has several benefits for businesses like improved finances, improved services, and outputs, etc.