The importance of asset management: steering towards safety and sustainability
As I pen this article, my partner is at our local Vehicle Testing New Zealand facility, diligently overseeing the process of obtaining a warrant of fitness for my teenage daughter’s car. This minor disruption to our lives has prompted a broader reflection on the critical importance of the systems and processes for asset reliability and safety.
The warrant of fitness system exists to ensure vehicles are of a standard that minimises the risk of injury or fatality for both the individual operating the vehicle (in this case my daughter) and others they may encounter on the motorway.
When we have devoted considerable time and effort to developing and nurturing an organisation or business, or when we have been entrusted with the stewardship of one that has been carefully cultivated by others, it is important that we maintain a focus on the 'asset vehicle' that propels the organisation forward.
Te Waihanga’s recent report on the State of Play for Asset Management in New Zealand gave directors the recommendation to improve their leadership and governance in the asset management space. This article seeks to provide some areas of potential focus for directors, to positively impact asset performance and incorporate a sustainability lens.
Exposure
Organisations differ significantly in their exposure to asset-related risks and many may already possess substantial processes for asset management. Nevertheless, the onus is on directors to periodically review current practices through the broadest lens possible and ensure risk exposures are elevated and connected effectively to strategy.
Regulatory
First among all requirements is the need to ensure asset management is adequately connected to current and potential future regulatory requirements, and that strategies are in place to manage the foreseeable scenarios. In a fast-moving environment it can be difficult for teams to stay abreast of these changes and it is worth driving a periodic separate workstream to review latest requirements and to track and update potential future scenarios.
Cross pollination
It is a fundamental truth that one cannot manage what remains unknown. At times, established systems and processes may inadvertently harbour unconscious biases that lead to significant blind spots regarding asset risk. There is the opportunity for different sectors to learn from each other in the management of different asset classes. As examples, the manufacturing industry has well established systems for managing production assets, while there have been excellent advances in the transport and forestry industries in the management of geographically disbursed assets using digital tools. In the buildings space there are established build warrant of fitness processes and benchmarks for sustainability. One of the many advantages an independent director brings to any business is the ability to provide cross-industry insights and perspective.
Tremors versus earthquakes
A director must consider whether significant risks are being appropriately elevated and managed within the overarching business strategy, and whether there is a robust connection between the asset management strategy and the other business strategies. This consideration should include whether the asset management strategy possesses a forward-looking perspective, including potential risks stemming from evolving customer preferences and demographics, population growth and statistics, climate change, encroachment, and prospective changes pertaining to regulatory requirements.
Building for sustainability and resilience
The Te Waihanga report also highlighted the importance of building and renewing for resilience and prioritising this focus over just recovery. Post Cyclone Gabrielle there was a desire to build back stronger and better, but the reality was that the need to re-establish asset and services had to take priority. With the luxury of time there is the opportunity for directors to challenge the status quo and encourage the business to bring sustainability and resilience into the asset management framework. An example may be ensuring the solution set for end-of-life replacements includes sustainability to allow informed decision making, balancing cost and other business outcomes.
Thinking about the financials differently
As my colleagues state in this Aurecon-Te Waihanga | Infrastructure NZ piece, New Zealand’s persistent underinvestment in maintaining and renewing our infrastructure has become a major long-term challenge for our economy and productivity. Unlocking these assets through revitalisation, repurposing or reinvestment is a huge potential productivity gain. If an asset has a strong revenue stream attached to it, there could be private sector investment interest in its upgrade. Recycling existing assets is a highly effective way to invest in higher performing infrastructure.
Takeaways for directors:
- What does the asset management system look like for the business – do we have a “one view” across all our assets regardless of age, life cycle or complexity?
- Have we considered renewing or recycling current assets rather than investing in new?
- Are we linking our asset management to our business growth strategy?
- What is our level of asset resilience?
Vicky Webb is the industry leader for Aurecon’s manufacturing business in New Zealand, with 30 years’ experience leading multidisciplinary teams in delivering innovative projects for a wide range of New Zealand manufacturing clients. A process engineer from the University of Canterbury, she leads a team of engineers who specialise in asset development and renewal.
