Asset management: providing service, managing costs and risks

The management of assets requires evidence-based decisions on the correct course of action taken in reference to level of service, cost and risk.. Asset management takes performance, risk and cost into account by monitoring, evaluating, and optimising assets using formal systematic processes. Tools and processes at strategic, policy, and tactical level form an integrated framework to proactively and consistently identify and assess risks, and select appropriate controls. This places risk identification, assessment, and control (together, risk management) at the centre of asset management, and the availability and quality of asset data at the centre of asset decision making. 

Managing risk with limited resources has long been a necessity for managing assets and their services to customers in many municipalities. Increasing financial pressures ranging from limited tax revenue to limited cost recovery for services force municipalities to negotiate spending on capital investment and maintenance schemes in light of acceptable levels of risk. Over- or under-engineering municipal infrastructure is increasingly unacceptable for stakeholders; instead, asset management practices are becoming increasingly a deliberate trade-off for providing acceptable levels of service at optimal cost and risk. 

Conceptualising a risk assessment framework requires clear definitions of risk. In more general terms, risk is a measure of the non-compliance with service standards. Taking the example of water supply services, the key objective is to provide safe and reliable drinking water that has the trust of consumers. The principal areas for developing level of service criteria and defining a risk assessment framework may include

• Water quality from the assets.
• Ability to meet demand (Availability).
• Reliability of assets and networks to supply services.
• Customer satisfaction.

A RISK ASSESSMENT FRAMEWORK ASSESSES ANY RISKS IN CONTEXT OF STRATEGIC OBJECTIVES SUCH AS PUBLIC HEALTH OR SERVICE AVAILABILITY

In a risk assessment, the chance or likelihood of an asset failure or external event is set into context of providing safe and reliable drinking water supply service. It will also assess the inability of an asset to maintain a required standard of service.

Considering that any failure in any of the above areas may have a serious effect on public health, the management of these risks requires due consideration to mitigate these risks to an acceptable level. Mitigation of risks can be achieved through capital investments as part of a risk reduction programme; it may also include asset maintenance programmes to prevent the long term deterioration of asset condition and the increasing reliability issues that come long with an aging asset.

Risk assessments inform capital asset investment and maintenance programmes. These capital plans and their corresponding financing plans provide significant opportunities to programme an efficient capital asset delivery mechanism based on optimized sequencing of individual projects that constitute the overall asset management programme.