Home Asset Management Why it’s important to have good asset and financial management planning

Why it’s important to have good asset and financial management planning

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A good asset management plan can bring many benefits to an organisation, including measurable improvements in operational productivity and efficiency, lower lifecycle costs, sustainable levels of service and better management of risk and compliance. But just having an asset management plan is no guarantee for business success.

What constitutes a good plan? And once a plan is in place, what should be done to get the best from it? Allen Mapstone, IPWEA’s Director of Strategic Asset Management, explains.

Q: Why is it important to have a good asset management plan?

A: Above all, an asset management plan is important for communication and transparency in an organisation’s decision-making. The challenge for long-lived infrastructure is that problems with assets can sneak up on the organisation over time and so it isn’t good to rely on short-term planning. An organisation must have a view to manage an asset over the longer term with credible information that’s going to clearly communicate the risks and challenges over that period.

Q: How do we know asset management plans benefit businesses?

A: Many organisations with developed plans have begun to see the benefit of better communication to decision-makers about the consequences of their choices. This has enabled those organisations to make strategic decisions that better serve their customers and stakeholders. On the other hand, we have seen negative consequences to organisations with inadequate asset and financial management plans in place. This has resulted in significant, and in some instances even catastrophic service level and financial sustainability failures, so the prudent choice is to have plans in place

Q: What constitutes a good asset management plan as opposed to a bad one?

A: A good asset management plan is one that is realistic, reliable, transparent and connects with decision-makers and influences the way they plan for the future. It also must link and be aligned with the financial planning strategy and long-term financial plan to be effective. In other words, a good plan is one that makes a difference. Sitting in behind any good plan are a few other layers worth considering, such as how well it builds the credibility of the information you have, and how well it builds messaging – how well an organisation uses the tools at its disposal to explain options and consequences to inform its decisions for the future.

Q: Why should your asset management plan be aligned with your organisation’s core objectives?

A: This is important because the three key aspects of any organisation – the asset corporate objectives, the plan for managing the assets that underpin many services and financial planning – are intrinsically linked. For example, for infrastructure organisations, a lot of the services that are provided are supported by the physical infrastructure it manages. If an asset plan provides assistance with managing those assets and the services are financially sustainable, then it’s doing its job. Asset planning and financial planning must align. I’d say it’s an integrated financial-planning approach, because the budget drives what an organisation can and can’t do. The asset plan has to talk very clearly about what can and can’t be done so that the decision-makers can then make the best financial choices.

Q: What assets of a business should be considered as part of an asset management plan and why should these be incorporated?

A: When an organisation starts its asset planning, it’s easy to be overwhelmed – it’s a big job. I suggest starting off by considering the high financial value assets and the critical assets that should be included in the plan. Generally, an organisation can use the 80/20 rule to decide which assets are of vital importance.

Q: What else should be considered to ensure an asset management plan is as effective as possible and has the desired results?

A: An asset management plan is a continual improvement process. The three areas that link up – the asset plan, the organisational objectives and financial management – can align over time. An organisation eventually moves away from just annual budgeting to long-term planning, but within that long-term planning the asset plan will also inform each year’s annual budget.

Q: Why should an asset management plan encompass a holistic view of the assets being managed?

A: If technical experts in organisations think only about the physical aspect of a particular asset and the way it behaves, they are missing a broader view that is required to better serve the organisation in the long run. So, whether we talk about climate change or changing attitudes to people or even people’s expectations, it’s important to encompass this in a holistic view to asset management planning.

Q: Should a business outsource the development and administration of an asset management plan or should this be done internally?

A: There is absolutely nothing wrong with outsourcing and using the expertise of specialists. However, an organisation must take responsibility and stewardship of its own asset management planning to truly get the best from it.

Q: How can the IPWEA help businesses implement a successful asset management plan?

A: IPWEA has extensive resources for asset and financial management of infrastructure, as well as specialist guidance for asset management for fleet.

Hear more from Allen Mapstone about the importance of Asset Management Planning in organisations in this video.

For more information, visit www.ipwea.org.