Asset Management A Risk Based Approach

By Author: David Strong
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Asset management: A Risk Based Approach
Written: David Strong
CBC Group
https://www.cbcgroup.com.au/news/blogs/asset-management-a-risk-based-approach

Assets are the lifeblood of any business, they drive operations, generate revenue, and ultimately determine success.
Yet, managing these assets is not without its challenges.
Enter the concept of risk-based asset management. This approach integrates risk management into asset management practices, enhancing strategic decision-making.
In this article, we delve into the intricacies of this approach. We explore its relevance in facilities management and its alignment with standards like ISO 55001
This comprehensive guide will equip you with the knowledge to navigate the complex landscape of risk-based asset management.
Understanding Asset Management and Its Significance
Asset management is a systematic process of developing, operating, maintaining, and cost-effectively selling assets. It's a critical business function that encompasses various types of assets, including physical assets like machinery and buildings, and intangible ...
... assets like intellectual property and goodwill.
The significance of asset management cannot be overstated. It ensures optimal utilisation of assets, enhances operational efficiency and drives profitability. Effective asset management can lead to improved customer satisfaction, reduced environmental impact, and increased competitiveness. In essence, it's a cornerstone of a company's success.

The Intersection of Risk Management and Asset Management
Risk management is an integral part of asset management. It involves identifying, assessing, and prioritising risks associated with an organisation's assets. The goal is to minimise negative impacts on the organisation's operations and objectives.
By integrating risk management into asset management practices, organisations can make informed decisions about asset usage, maintenance, and disposal. This risk-based approach allows for proactive management of risks, enhancing the resilience and sustainability of the organisation.
The Role of Facilities Management in Asset Management Practices
Facilities management plays a crucial role in asset management practices. It involves the coordination of the physical workplace with the people and work of an organisation. This includes managing the maintenance, care, and use of commercial or institutional buildings, equipment, and grounds.
In the context of risk-based asset management, facilities management helps identify and manage risks associated with the physical assets of an organisation. This includes risks related to safety, security, and operational efficiency. By effectively managing these risks, facilities management contributes to the overall effectiveness of asset management strategies.
Conducting an Asset-Based Risk Assessment in ISO 55001
ISO 55001 is a globally recognised standard for asset management. It provides a systematic approach to managing physical and intangible assets throughout their life cycle to maximise value and ensure sustainable performance. A key component of ISO 55001 is conducting an asset-based risk assessment.
An asset-based risk assessment involves identifying the assets that could be affected by potential risks and understanding how these risks could impact asset performance and organisational objectives. These assets can include physical assets like equipment and infrastructure, as well as intangible assets such as data and intellectual property. The next step is to identify the risks associated with these assets and evaluate their potential impact on asset performance and organisational goals.
The following steps outline the process of conducting an asset-based risk assessment in ISO 55001:
Identify Assets: Create a comprehensive inventory of all assets, considering their value and criticality to the organisation.
Identify Risks to Each Asset: Determine potential risks that could impact each asset's ability to perform as required.
Identify Vulnerabilities: Identify weaknesses that could make the assets susceptible to the identified risks.
Evaluate Impact of Potential Risks: Assess the potential consequences if a risk were to materialise.
Determine Likelihood of Occurrence: Evaluate how likely each risk is to occur.
Calculate Level of Risk: Combine the impact and likelihood to determine the overall risk level for each asset.
By conducting an asset-based risk assessment, organisations can better understand their risk landscape and implement appropriate controls to manage these risks effectively.
Key Asset Management Strategies in a Risk-Based Framework
In a risk-based asset management framework, strategies are designed to balance the performance, cost, and risk of assets. This approach ensures that assets deliver their required service sustainably and helps organisations make informed decisions about asset investments and operations.
Key strategies include the identification and categorisation of assets, risk assessment, risk prioritisation, and risk mitigation. These strategies are supported by a clear understanding of the organisation's risk appetite and tolerance levels. By integrating risk management into asset management, organisations can enhance their resilience and achieve their business objectives more effectively.
Identifying and Ranking Organisational Assets
The first step in risk-based asset management is identifying and grouping organisational assets. This involves creating an inventory of all assets, including physical assets like buildings and equipment and intangible assets like software and data. Each asset should be categorised based on its type, value, and criticality to the organisation’s operations.
The process of identifying and categorising assets helps organisations understand their asset portfolio better. It also provides a foundation for assessing the risks associated with each asset. This information is crucial for developing effective asset management strategies and making informed decisions about asset investments and operations.
Techniques for Assessing Asset-Related Risks
Once assets are identified and categorised, the next step is to assess the risks associated with each asset. This involves evaluating the likelihood and potential impact of various risk events on the assets. Techniques such as risk matrices, fault tree analysis, and failure mode and effects analysis can be used to systematically assess asset-related risks.
The risk assessment process should consider a wide range of risk factors, including operational, financial, strategic, and environmental risks. It should also consider the organisation's risk appetite and tolerance levels. This comprehensive risk assessment forms the basis for cataloguing risks and developing risk mitigation strategies.
Prioritising Risks and Establishing a Risk Appetite
After assessing the risks associated with each asset, the next step is to prioritise these risks. This involves ranking the risks based on their potential impact on the organisation and the likelihood of their occurrence. Risk prioritisation helps organisations focus their resources on managing the most significant risks.
Establishing a risk appetite is another crucial aspect of risk-based asset management. Risk appetite refers to the level of risk an organisation is willing to accept in pursuit of its objectives. It serves as a guide for decision-making, helping organisations balance the potential benefits of an opportunity against the associated risks.
Mitigation and Response: Strategies to Handle Asset Risks
Once risks have been identified and prioritised, organisations need to develop strategies to handle these risks. These strategies can include risk mitigation, risk transfer, risk acceptance, or risk avoidance. The chosen strategy should align with the organisation's risk appetite and overall business objectives.
Risk Mitigation: Implementing measures to reduce the likelihood or impact of a risk.
Risk Transfer: Shifting the risk to another party, such as through insurance.
Risk Acceptance: Acknowledging the risk and preparing a contingency plan.
Risk Avoidance: Changing business practices to completely avoid the risk.
Leveraging Technology for Risk-Based Asset Management
Technology plays a crucial role in facilitating risk-based asset management. Advanced software and tools can automate the process of identifying, assessing, and managing asset-related risks. They can also provide real-time insights and predictive analytics to help organisations make informed decisions.
Emerging technologies like the Internet of Things (IoT) and Artificial Intelligence (AI) are revolutionising asset management. IoT devices can monitor asset performance and detect anomalies, while AI can analyse vast amounts of data to predict potential risks. These technologies can significantly enhance the effectiveness of risk-based asset management strategies.
Integrating Risk Management into Asset Management for Organisational Resilience
Integrating risk management into asset management is crucial for organisational resilience. A risk-based approach to asset management allows organisations to anticipate potential threats, make informed decisions, and ensure business continuity. It also aligns asset management practices with business objectives and risk management goals, enhancing overall organisational performance.
Continuous monitoring, review, and improvement of the asset management plan are essential for its effectiveness. As the business environment and risk landscape evolve, organisations must adapt their asset management strategies accordingly. This will ensure they remain resilient in the face of changing circumstances and emerging risks.