Different industries and different companies have varying types of risk when it comes to risk management, but all organisations have assets which can be considered ‘at risk’ in a number of ways.
Assets drive the success of your business, while risks can lead to losses or even threaten the survival of an organisation.
And while many would think that risk management and asset management are unrelated, the truth is that when it comes to ensuring your business’ safety they are closely intertwined.
So, how do risk management and asset management relate to each other? We take a closer look at how risk management impacts asset management, and how the former can support the latter.
What is risk management?
Risk refers to the impact of uncertainty on your objectives. In turn, risk management is identifying, assessing, and prioritising risks, after which you apply resources – in a coordinated and economically efficient way – to minimise, monitor, and control the likelihood and impact of unfortunate events.
What is asset management?
Asset management refers to the systematic, coordinated practices by which an organisation manages its assets, to realise value from these assets. It's aimed at enhancing asset performance, risk, and expenditure over the entire asset life cycle, ultimately for achieving the enterprise's strategic goals.
Asset management can be said to start at the asset procurement planning stage and continue to the acquisition stage. From there it encompasses the operating, maintenance, and improvement stage, and finally the disposal stage. The assets can be physical, intangible, software based, and so on.
Why risk management and asset management need to work together
Risk management and asset management need to work together because every stage of asset management comes with uncertainty, and therefore a business’ inherent risks.
Optimally managing your organisation's assets requires addressing specific risk management issues – risk elements that directly contribute to asset management practices and outcomes.
Risk management is therefore a fundamental pillar of effective asset management. At each asset management stage, you have specific risks that need to be managed:
- Concept and specification – At the asset concept and specification stage when you're identifying what asset(s) you need, you're at risk of choosing solutions you don't need as well as poorly specifying your asset requirements.
- Acquisition – At the acquisition stage, your business is at risk of acquiring assets that don't meet necessary specifications.
- Operation and maintenance – At the operation and maintenance stage, you're at risk of maintaining costly assets that don't deliver the services you need.
- Improvement – At the improvement stage, your organisation is at risk of finding it challenging to improve or manage change to your assets.
- Disposal – The disposal stage could bring unexpected issues associated with disposing of your end-of-life assets.
Other risk issues throughout the asset life cycle include not knowing what your organisation has in terms of assets, over- or under-maintenance, failure to manage assets properly, and improper operation of their equipment and other assets. Compliance and regulations, along with poor maintenance forfeiting manufacturer's warranties, could be other risks with direct consequences for asset management.
Further, managing technology risks, like hacking risks relating to Internet of Things and equipment, can support an effective asset management strategy, helping you keep your equipment and data protected from malicious attacks.
Asset Management Information Systems (AMISs) can help with managing your assets.
Check out our brochure to discover more about its functionality.
How risk management can assist with asset management
Given all the above ways poor risk management practices can impact on asset management outcomes, businesses ideally should have risk management policies working in support of asset management practices and systems. So exactly how could risk management support asset management?
With a good understanding of your assets through asset management and asset tracking, you'll know exactly what assets you're responsible for, where the assets are, their current condition, and how they should be maintained. And as you manage the risk associated with not having a comprehensive understanding of your assets, you can address asset management issues like ensuring assets are maintained properly and maximising asset life cycle.
Additionally, if you address risks at the concept, specification and acquisition stages, you could end up with the right assets/solutions that meet your specifications. Targeting operation and maintenance risks could minimise the risk of having assets that don't deliver the services you need. For asset changes or improvements, addressing the risk of poor upgrades could ensure you carry out asset improvements in the correct manner, in alignment with your strategic goals.
Finally, managing technology and compliance risks ensures your assets are protected from hackers and ensures compliance with regulations.
Protect your business and its assets today
Ultimately, risk management and asset management are integrally connected, and addressing risk issues helps you achieve your asset management objectives as well as broader ones like the bottom line and overall business targets.
Managing your business risks in the context of your asset management is a complex undertaking, and how you do it could range significantly depending on your organisation's unique needs. While you can't avoid and eliminate all asset-related risks, an asset management strategy that addresses the full range of potential risks could minimise your overall risk exposure, helping you take a measured approach to risk. Taking time to identify an effective asset risk management process for your unique business needs is the key.
Smart Asset is a best in class asset management information system offering a user-friendly interface, powerful asset tracking features, and mobility for field technicians. Contact us for a free demo or for a discussion about your business needs.