What Are Assets and Do You Really Need Asset Management?

I don't know about your social media feed, but I am daily bombarded with the term asset and asset management. More often than not, it is some annoying crypto scam.

Let's cut through the noise and talk about what these terms actually mean.

What is an Asset?

Let's break down what an 'asset' really is. According to the ISO 55000 standard, an asset is anything that has potential or actual value to an organization. This is a pretty broad definition, so let's categorize assets to make it clearer:

1. Physical Assets
2. Financial Assets
3. Human Assets
4. Information Assets
5. Intangible Assets.

Physical assets are items such as buildings, machinery, infrastructure like roads and railways, vehicles, and communication equipment.

Besides physical, we also consider financial, human and information assets to the extent that they support the management of physical assets.

Intangible assets are non-physical things such as goodwill and intellectual property.

What is Asset Management?

According to ISO 55000, asset management is defined as the "coordinated activity of an organization to realize value from assets."

But what does that really mean???

Think of asset management as a systematic approach to deciding which assets a business needs.

How to fund them, how to acquire and maintain them and even how to replace or dispose of them when the time comes.

It's more than just maintenance; it's about aligning assets with business goals and strategically managing them from start to finish.

The core aim is to ensure an organization has the right assets for its needs and that those assets are running efficiently.

We're striving to extract the most value from our assets while balancing costs, risks, performance, and other factors!

Imagine the life of an asset as a journey.

1. It starts with identifying a business opportunity or need.
2. From there, we analyze what we should acquire, both physically and financially.
3. Then comes the actual buying or implementation phase.
4. Once it's ours, we need to maintain it, provide logistics, run it, and
5. eventually decide when to let it go or replace it.

As asset managers, we're involved in this whole journey.

We help the organization decide what assets they need. We assist with budgeting for both initial costs and running costs. We set up systems to support these assets throughout their lifetime. And importantly, we're here to anticipate and prevent any unwanted surprises.

In essence, asset management is about making informed, strategic decisions throughout an asset's life, ensuring it serves our organization's goals at every stage.

The Role of Asset Management

Organizations that rely heavily on physical assets—such as plants, machinery, buildings, and infrastructure like roads, bridges, and utilities—are prime candidates for asset management. This includes industries like electricity, gas, water, transport, oil and gas, mining, chemicals, manufacturing, aviation, and defense. Essentially, any sector where tangible assets are crucial.

Asset management bridges the technical and business worlds.

An asset manager needs to be both technically savvy and business-minded. Often, these professionals have backgrounds in maintenance or logistics and have shifted to roles requiring both technical and financial knowledge.

While engineering and maintenance focus on specific technical aspects, asset management combines logistics and business strategies. Other roles, such as finance or IT, might touch on assets but don't delve into their complexities. Senior managers from diverse backgrounds, such as politics or marketing, depend on asset managers for expertise in asset-related issues.

Want more insights? Check out other articles in The Value Chain for more strategies on optimizing assets, operations, and supply chain management.

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