Asset Management - An Anatomy (2nd Ed.)

Asset Management an anatomy
Version 2
Copyright The Institute of Asset Management 2014. All rights reserved
July 2014
www.theIAM.org
An Anatomy of Asset Management
Issue 2 July 2014

Anatomy = the study of the structure or internal workings of something
for the purpose of examining and analysing its parts
This document is published by the Institute of Asset Management

for the benefit of our Members and the general public
You are welcome to use this document for personal study or to educate and inform other members of your
organisation however, please do not use it for commercial gain, copy it in its entirety or make electronic copies.
Please ask each person who wants a copy to download it individually free of charge from our website
www.theIAM.org/AMA. The IAM will inform you when this document is amended and when any new
companion documents are available. If you copy any part of it please acknowledge the source and do not crop
or remove our branding.
This document was first issued in 2011 and this 2014 version has been aligned with other IAM Projects, the
GFMAM Landscape vs 2 and the ISO 55000 series of standards. However, this process is always ongoing and we
welcome responses to this document as part of our commitment to continuous improvement.
Copyright (c) The Institute of Asset Management Ltd 2014, all rights reserved.
Disclaimer: The IAM and their agents, servants or contractors do not accept any liability for any losses arising under or in
connection with this information. This limit on liability applies to all and any claims in contract, tort (including negligence),
misrepresentation (excluding fraudulent misrepresentation), breach of statutory duty or otherwise. This limit on liability does
not exclude or restrict liability where prohibited by the law nor does it supersede the express terms of any related agreements.
All copyright and other intellectual property rights arising in any information contained within this document are,
unless otherwise stated, owned by The Institute of Asset Management Ltd or other companies in The Institute of Asset
Management Ltd group of companies. No part of this publication may be reproduced in any material form (including
photocopying and restoring in any medium or electronic means and whether or not transiently or incidentally) without the
written permission of The Institute of Asset Management Ltd.
Publishing and copyright information

This document is published by the Institute of Asset Management www.theIAM.org
The IAM copyright notice displayed in this document indicates the date of last revision and issue
Amendment Number
Date
Comments
July 2014
Finalising for print and correcting typographical errors
Copyright The Institute of Asset Management 2014. All rights reserved.
Contents
1
2
3
4
5
5.1
5.2
5.3
5.4
5.5
5.6
INTRODUCTION
WHAT DOES ASSET MANAGEMENT MEAN?
CONCEPTS AND PRINCIPLES
THE SCOPE OF ASSET MANAGEMENT
SUBJECTS GROUPS AND DESCRIPTIONS
STRATEGY & PLANNING
5.1.1
Asset Management Policy
5.1.2
Asset Management Strategy & Objectives
5.1.3
Demand Analysis
5.1.4
Strategic Planning
5.1.5
Asset Management Planning
ASSET MANAGEMENT DECISION-MAKING
5.2.1
Capital Investment Decision-Making
5.2.2
Operations & Maintenance Decision-Making
5.2.3
Life Cycle Value Realisation
5.2.4
Resourcing Strategy
5.2.5
Shutdowns & Outage Strategy
LIFE CYCLE ACTIVITIES
5.3.1
Technical Standards & Legislation
5.3.2
Asset Creation & Acquisition
5.3.3
Systems Engineering
5.3.4
Configuration Management
5.3.5
Maintenance Delivery
5.3.6
Reliability Engineering
5.3.7
Asset Operations
5.3.8
Resource Management
5.3.9
Shutdown & Outage Management
5.3.10 Fault & Incident Response
5.3.11 Asset Decommissioning and Disposal
ASSET INFORMATION
5.4.1
Asset Information Strategy
5.4.2
Asset Information Standards
5.4.3
Asset Information Systems
5.4.4
Data & Information Management
ORGANISATION AND PEOPLE
5.5.1
Procurement & Supply Chain Management
5.5.2
Asset Management Leadership
5.5.3
Organisational Structure
5.5.4
Organisational Culture
5.5.5
Competence Management
RISK & REVIEW
5.6.1
Risk Assessment and Management
5.6.2
Contingency Planning & Resilience Analysis
5.6.3
Sustainable Development
5.6.4
Management of Change
5.6.5
Assets Performance & Health Monitoring
5.6.6
Asset Management System Monitoring
5.6.7
Management Review, Audit & Assurance
5.6.8
Asset Costing & Valuation
5.6.9
Stakeholder Engagement
DEFINITIONS
1
5
7
15
18
18
20
20
22
22
23
25
26
27
29
31
33
35
36
37
37
39
40
41
43
43
44
45
45
47
49
50
50
51
52
53
54
55
55
56
57
58
59
61
62
62
63
64
64
66
67
iii
iii
Issue 2 July 2014
Issue 2 July 2014
Foreword
The Institute of Asset Management (IAM) is a not-for-profit Learned Society. It is owned and controlled by our
Voting Members i.e. those competent professionals who choose to participate in our work. We are committed to
remaining independent from commercial and trade associations. We exist to advance the science, practice and
discipline of Asset Management for the public benefit. Our priorities are to promote and enable the generation and
application of knowledge, training and good practice, and to help individuals become demonstrably competent.
The discipline of Asset Management is neither owned nor controlled by the IAM. However, as an institute we invest
time and effort to develop thinking and generate knowledge, tools and services to support anyone interested in
this young and emerging discipline. This Anatomy is part of that work and will be updated and improved from time
to time. We invite you to register with us to ensure you have access to the latest version of this or other related
documents.
Expertise in the discipline of Asset Management is increasingly important for many organisations. Such expertise
draws from all functions within an organisation: from business, financial and management of human resources as
well as, technical, engineering, operations and maintenance management. It is particularly challenging, therefore,
to gain a good understanding across the whole breadth of the knowledge base; this breadth is, of course, part of
its appeal. A core purpose of this document is to provide a platform of common language describing the principles
of Asset management thus supporting organisations and individuals introduction to extensive subject that is Asset
Management. You may have a particular interest in the value to be gained by any organisation or business that
chooses to apply Asset Management properly.
Given the relative youth and breadth of the topic, it is inevitable that people will come to Asset Management
having already demonstrated competence in a profession, such as engineering or finance, and may have specialist
expertise in a field such as maintenance or auditing. The IAM welcomes people from any discipline and encourages
your participation to help achieve a true cross-sector perspective.
As part of our strategy to collect, develop, collate and make available knowledge, services, products and events
relating to Asset Management, the IAM will be releasing a series of documents to expand on each Subject covered
in this Anatomy. Eventually there will be Subject Specific Guidelines (SSGs) covering all of the 39 Subjects of Asset
Management that are described in this Anatomy document. These will not be textbooks or course material but
should act as reference documents for professionals working in this field. The IAM encourages members to share
their experiences, and to make available case study examples. SSGs will include case study examples relevant to
specific topics.
If you want to get involved in IAM activities and projects you may like to look at - and contribute to - the IAM
Knowledge Centre at http://theiam.org/wiki/Main_Page, or discuss relevant topics on LinkedIn, where there is an
official IAM Group at www.linkedin.com/groups?about=&gid=965657.
iv
Issue 2 July 2014

Anatomy = the study of the structure or internal workings of something
for the purpose of examining and analysing its parts
Issue 2 July 2014
1. Introduction
This book offers readers an appreciation of Asset
Management: what it is, what it can help you achieve;
the scope of the discipline (including what is not
included!) and a description of the fundamental concepts
and philosophy.
Many excellent textbooks exist and more are emerging
in this subject area, along with training courses and
qualifications. These will be essential for people intending
to learn - and become expert in - Asset Management.
This document is not a textbook, training course or a list
of techniques and tools, but provides a high-level view
of the discipline and is a source of reference for anyone
seeking to understand it.
If you are intrigued by these ideas, or want to
achieve the benefits available to your organisation or
business, you may wish to learn more. In fact you
may already have a desire to start implementing an
Asset Management approach in your organisation.
Beware! This is not an overnight transformation or
recipe for instant success. It is an approach; a way of
thinking; a transformation of organisational alignment
and culture that may even be seen as a threat to
existing departments and structures. The potential
benefits are significant but the implementation requires
commitment over a sustained period.
The IAM is aware that Asset Management is a young
discipline for many industry sectors and, as we develop
the knowledge base, the descriptions in this document
will need to be updated from time to time. If you have
downloaded this document from the IAM website, we
shall tell you when a new version is available. If you
have been forwarded a copy by a colleague, we would
encourage you to download a fresh copy to ensure you
receive the latest version.
We would appreciate your feedback, including any
suggestions on how to improve the usefulness or
readability of this document.
The benefits of good Asset Management

The IAM promotes the benefits of Asset Management
to the Boardrooms of asset intensive businesses, as we
believe it is more relevant than ever to help companies
and governments come to terms with the economic
realities we are facing.
How many organisations can answer the following
questions?
Do you understand the risk profile associated with
your asset portfolio and how this will change over
time?
Can you demonstrate the business consequences of
reducing - or increasing - your capital investment or
maintenance budgets by 10% over the next five years?
Can you justify your planned asset expenditures to
external stakeholders?
Can you easily identify which investment projects to
defer when there are funding or cash flow constraints?
Do you have the appropriate asset data and
information to support your Asset Management
decision-making?
Do you know if your people have the right
competences and capabilities to manage your assets?
Do you know which Asset Management activities to
outsource?
As organisations are coming under increasing pressure
to deliver more for less, it is imperative that these types
of questions can be answered. Organisations that
have developed their capabilities in Asset Management
to a relatively high level of maturity can answer these
questions with a high degree of confidence. This helps
enormously when dealing with shareholders, regulators,
customers, investors or politicians who do not have the

time or the skills to understand the long-term implications
of the decisions they make. Where these decisions
impact on assets, asset performance, risk or net value
realisation, it is the Asset Management communities
responsibility to articulate these implications and the
adoption of a holistic Asset Management approach is
essential to enable this.
The prize for getting it right is certainly very big. The
available case studies and increasing hard evidence
demonstrate; a mix of higher performance levels; lower
costs; greater consistency; increased confidence and
credibility; happier customers; staff and regulators and
more sustainable outcomes. Organisations from a wide
range of industries are reporting significant gains in
business performance, while simultaneously controlling
costs, risks and long term capability.
Perhaps even more importantly, organisations that have
been evolving their Asset Management approach over
several years report a significant re-engagement of
Issue 2 July 2014
the workforce, a breaking down of inter-departmental

barriers and a collective, well-motivated commitment to
delivering better value-for-money. Asset Management
evidently stimulates healthy grassroots creativity and
innovation as well as providing the necessary top-down
alignment of priorities and resource targeting.
For further information on these benefits, please look for
the relevant case studies on the IAM website.
The Anatomy of Asset Management

To use a medical analogy, no self-respecting doctor
is ignorant of basic anatomy. They expect to have
a working knowledge of the whole body as well as
developing deeper knowledge and expertise in a chosen
specialty. However it is also true that no single person
can realistically seek or claim to be an expert in every
medical speciality.
In the same way we would expect everybody in Asset
Management to have a working knowledge of the 39
Subjects of Asset Management described in this Anatomy
Issue 2 July 2014
document, but the degree to which they might need

deep or specialist knowledge will depend on the job or
task they perform.
Again, like medicine, each Subject can to some extent
be approached and learned independently. But, also like
medicine, Asset Management is a holistic discipline and is
only achieved by consideration of the complete scope as
described by these 39 subjects.
system for assets but it does not explain how it

should be done, and it needs some interpretation and
knowledge to use effectively. This is quite deliberate,
and ensures that the standard can be applied and add
value across many types of organisations while not
constraining the solution. It provides a very powerful
framework and is an invaluable checklist for good
practice.
Sections of this Book

Management System Standards
If you are familiar with ISO 55001:2014, you will be
aware that this specification itemises 24 clauses specifying
71 shall statements for an Asset Management System.
This sometimes leads to confusion, because 39 Subjects
are described here!
It is important to understand that the 39 Subjects
describe the body of Asset Management knowledge
as a whole, whereas ISO 55001 (and PAS 55) specify
the requirements for an organisations management
system - to direct, control and continually refine Asset
Management. The 39 Subjects are aligned with
the Asset Management Landscape vs 2, published
by the Global Forum on Maintenance and Asset
Management (GMFAM), which was developed by the
global Asset Management community to define the
scope of the discipline.
Please note, therefore, that familiarity with the
management system standard alone does not constitute
knowledge and competence across the whole discipline
of Asset Management!
For anyone wanting to master the discipline, knowledge
of the ISO 55000 series is important but not the whole
picture - you really need to learn the whole discipline as
represented by the 39 Subjects, albeit to different levels
and degrees depending upon your area of responsibility
or operational environment.
This document is set out in several sections and

we recommend that you read Sections 2, 3 and 4
sequentially. However the individual descriptions of
the 39 subjects in Section 5 can be used as a reference
as you wish.
The Subjects are organised in six Subject Groups,
which correspond to our conceptual model. The
model, the Subject Groups and the individual
Subjects have evolved since the first version of the
Anatomy was published in 2011 through considerable
international discussion and consensus about the best
framework in which to organise Asset Management
knowledge and debate.
Depending on the nature of your business, you may
well find that some subjects cover topics that you do not
see as relevant to you. The Anatomy is intended to be
suitable for every business that manages assets from
the smallest enterprise to large international utilities. We
would encourage you to explore the entire Subject area
you may find that there are useful ideas and concepts
that will help your business.
Essentially the ISO 55000 series of documents will tell

you what is required to be in place for a management
Although the Subjects can be described individually, they

should be not considered as discrete, independent topics.
Their interrelationship and interaction is what makes
Asset Management such a powerful discipline. The
contribution they make as a whole to an organisations
capabilities are an extremely important aspect of Asset
Management. The jigsaw puzzle only makes sense (and
generates maximum value) when all the pieces are joined
up to reveal the bigger picture.
Issue 2 July 2014
Issue 2 July 2014
2. What does Asset

Management mean?
(A rose by any other name William Shakespeare, Romeo and Juliet)
As the discipline matures, more and more people
understand that Asset Management is not so much
about doing things to assets but about using assets
to deliver value and achieve the organisations explicit
purposes. So, if Asset Management does not mean
managing the assets, what does it mean?
Great efforts have been made to find a better title

without success! However, once understood, the
term Asset Management is exactly right for what
we seek to do. It converts the fundamental aims of
the organisation into the practical implications for
choosing, acquiring (or creating), utilising (operating)
and looking after (maintaining) appropriate assets to
deliver those aims. And it does so while seeking the
best total value approach (the optimal combination of
costs, risks, performance and sustainability).
What are the differences? What do we find in

common? In short, what are the underlying Asset
Management bits, irrespective the assets we are
trying to manage? In most cases, the qualifying
adjectives dont help at all they try to make a special
case for something that is inherently consistent,
whatever the type or nature of the assets. If you
scratch beneath the surface, there are a set of clear,
generic requirements for applying the label Asset
Management appropriately:
Asset Management gathers together the knowledge

and tools an organisation needs to use its assets to
achieve its purpose. Moreover these techniques and
processes allow such an organisation to demonstrate
that it is managing its assets optimally often of
great interest to many stakeholders, whether owners,
customers, regulators, neighbours or the general
public.
In our opinion, good Asset Management
A web search for Asset Management reveals not

only a predominance of financial services but also a
confusing range of flavours and variants. There are
many qualifying adjectives attached to the front of the
term Asset Management - we find:
Enterprise Asset Management,
Infrastructure Asset Management,
Physical Asset Management,
Strategic Asset Management.

Property Asset Management.
Facilities Asset Management.
Integrated Asset Management.
and many others.
is strategic (aligned with the organisational strategy);

should be enterprise wide (avoiding silos);
applies to asset owners, managers and those
with delegated management responsibilities (e.g.
outsourced asset responsibilities);
has to balance costs, risks and performance on
different timescales;
applies to both tangible or physical and intangible
assets; and
applies to public, private and not-for-profit
organisations.
Fortunately the development of the ISO 55000 series
has enabled the international expert community to
converge on the simplest term: Asset Management,
plain and unadorned! ISO 55000:2014 defines Asset
Management as: the coordinated activity of an

organization to realise value from assets; and an
asset is an item, thing or entity that has potential
or actual value to an organization.
These may seem like very general definitions. This
is intentional, as the thinking is common to the use
of assets, in whatever form they take. It is up to the
Issue 2 July 2014
organisation to choose how to manage those

assets to derive best value, and value will take different
forms to different organisations (including, for example,
the minimisation of risk or liabilities). These concepts
are explored in the next section. However, it is not
the purpose of this document to repeat all the details;
reference should be made to the relevant publications if
further clarity is needed.
Issue 2 July 2014
3. Concepts and Principles

Where modern concepts of Asset
Management have come from
Asset Management is not new, people and
organisations have been managing assets for
thousands of years. What has changed, however,
is the cumulative recognition of what good Asset
Management involves, the optimising of cost, risks,
performance, resources and benefits over the whole
asset life - within any absolute constraints.
These insights have three primary origins:
1. The financial services sector has been using the
term for over 100 years to describe the juggling
act of optimising risk, yield (performance), short
and long term security from a mixed portfolio of
cash, stocks & shares and other investments.
2. The North Sea oil & gas industry adopted the

term Asset Management in the era following
the Piper Alpha disaster and the oil price crash of
the late 1980s. Radical change was needed and it
was discovered that the creation of small, dynamic,
multi-disciplined teams managing each oil platform
(the asset) with a full Life Cycle view, unleashes
great creativity and massive improvements in
performance, safety and productivity.
3. Meanwhile, in Australia and New Zealand, the
public sector faced a perfect storm of falling
levels of service, escalating costs and poor
planning. The public outcry forced a corresponding
radical re-think, and the establishment of much
better strategic planning, prioritisation and valuefor-money thinking.
The lessons learnt from these widely different

environments have been remarkable similar, with
significant convergence of conclusions. Now the
message is spreading. Over the last 20 years it has
been penetrating the electrical and water utilities,
road and rail transport systems, mining, process and
manufacturing industries at an accelerating rate. All
are realising that there are great opportunities in a more
joined-up approach to management of assets.
Distinguishing characteristics of good

asset management
In a discipline as broad as Asset Management, it
can be difficult to pin down the vital individual elements
that make the total picture work effectively. Using a
medical analogy, an assembly of limbs, organs, muscles
and nerves does not adequately describe the whole
person. Nevertheless, there are some observable
attributes of good Asset Management (in contrast to
merely managing assets), captured in management
standards such as the ISO 55000 series and PAS 55:
Multi-disciplinary: asset management crosses
departmental and disciplinary boundaries and is
focused on creating or increasing value - whether
this be tangible or intangible, financial or nonfinancial.
Systematic: applied consistently and sustainably
through an effective management system
Systems-oriented: looking at assets in their systems
context, again to realise value
Risk-based: consideration of risks and liabilities is
inherent in all decision-making
Optimal: seeking the best compromise between
conflicting objectives, such as costs, risks,
opportunities and performance over the short- and
long-term.
Sustainable: plans should deliver optimal asset value
over the whole asset life, including ongoing system
performance, environmental and other long term
consequences.
Integrated: at the heart of good Asset Management
lies the need to be joined-up. The total jigsaw puzzle
Issue 2 July 2014
needs to work as a whole - and be more than just the

sum of the parts.
Underpinning concepts
To recognise and understand the features above, it is
essential to clarify some underlying concepts:
how Asset Management realises value from assets

what is meant by Life Cycle activities,
what we mean by optimal and
what is a management system?
what is alignment (or line of sight)
Assets and Value

Assets are things that have actual or potential value,
and Asset Management achieves the realisation of
that value. However, what constitutes value will
obviously depend on your viewpoint. An investor
seeks good profit or capital growth, a customer
wants high standards of performance at low cost, a
regulator looks for assurance, efficiency and long-term
sustainability. Value can be realised in the buy-&sell (capital value) sense, or in the asset utilisation
(performance value) sense. It can even be seen as a
negative if, for example, the asset is a liability (a
risk, responsibility or debt), in which case the value
realisation objectives would be to control or minimise
this liability.
Value must reflect the mix of stakeholders and their
expectations, and the best way of satisfying these
potentially competing expectations with available
funding and any absolute (e.g. legal) constraints.
The key concept is that it always involves trade-offs
between, or combinations of, the different interests
e.g. Net Present Value of short-term plus long-term
consequences rather than just todays or tomorrows
performance figures. Common trade-offs, and the
need to optimise the combination, exist between short
term and long term goals, between costs, risks and
performance outcomes, between capital investment
and subsequent operating costs, between asset
utilisation and asset care (maintenance).
Issue 2 July 2014
Value will also often involve a mix of tangible and

intangible benefits or risks in which case quantification
or scaling methods will be needed for the intangible
elements (such as reputation, customer satisfaction,
employee morale or environmental responsibility).
Assets themselves have different levels of granularity
some organisations identify individual equipment
items as discrete assets, towards which investment,
maintenance, spares or other activities are directed.
However such units generally yield functional
performance and value only in a systems context
the network, production line, infrastructure facility or
other larger entity.
So, to maximise value (various aspects of performance

in relation to expenditure, risks etc) it is essential that we
understand both the inputs, costs and risks at discrete
intervention and asset unit levels (at various stages in
their individual asset Life Cycles), and the higher, systems
integration levels of benefits or performance realisation,
again considering different timescales and horizons. This
is why other organisations define their assets at higher
levels (such as whole networks, infrastructure systems or
productive units) it enables a full value-for-money picture
of the Life Cycle activities (inputs) and total performance
benefits. However such systems-level asset management
may have reduced precision and agility in determining
what is really worth doing, where, when and why.
Typical priorities & values

Corporate/
Organization
Management
Portfolio return on investment

compliance & sustainability
Life Cycle
Activities:
efficiency &
effectiveness
LI
COFE C
ST YC
IN LE
G
Systems performance,
cost & risk optimization
OP
TI VA
M LU
IS E
AT
IO
N
Keeping stakeholders happy
Manage Asset Portfolio
Manage Asset Systems
Manage individual Assets over their Life Cycles
Figure 1. Hierarchy of assets within an integrated management system

The above understanding of the value that can be derived from our assets can help us by supporting optimum
decisions, but optimisation will need to be based on the constraints of our environment at any point in time (just
because optimum value would be attained by investing today does not mean we will have the resources (cash flow,
competence etc) available to realise this investment today.
Life Cycle Activities

The concept of Life Cycle activities is easy to
understand at the lowest levels of asset granularity,
such as physical equipment components. However
assets can only contribute value in a systems context
and more complex systems can have finite or infinite
life, depending on how we choose to manage them.
Patch and continue maintenance strategies, asset
Identify
need
Identify
need
Identify
need
Design
Select
replacements, modifications, obsolescence, changing

functional demands, recycling and other options need
to be considered, and the asset may even have a series
of owners during its life, with different objectives,
value criteria and planning horizons. Life cycle activity
planning, Life Cycle costs and value realisation periods
must be understood if short-termism and false
economies are to be avoided.
Dispose
and /or
Replace
Utilise and
Maintain
Create or
Aquire
Construct
Commission
Purchase
Install &
Configure
Issue 2 July 2014
Utilise and
Maintain
Utilise and
Maintain
De-commission
Manage
Residual
Liabilities
Sell
Recycle
and/or
Replace
Figure 2. Core asset Life Cycle stages and examples of variations
Optimised Decision-making
Optimal, risk-based decision-making is also a vital
element underpinning successful Asset Management.
This involves finding the right compromise between
competing interests, such as asset utilisation/
performance versus asset care (maintenance), capital
investment cost versus operating expenditures, or
short-term benefits versus long-term sustainability.
to maximise/minimise an objective function. This

usually represents the lowest combined business
impact of costs, risks and performance losses, or the
maximisation of net value, over the Life Cycle.
Optimisation involves identifying the best value

compromise between a set of competing objectives
It is also important to be proportionate Asset

Management decisions vary greatly in complexity
and criticality, so it is inappropriate to apply the
same level of sophistication to all decisions. Simple,
non-critical decisions can and should be made with
(educated) common sense, whereas higher impact
or influences (within any absolute constraints or

obligations). In practical terms Optimising involves
the adjusting inputs subject to constraints in order
decisions, with multiple influences, options, timings or

inter-dependencies require greater systematic, multidisciplined and auditable optimisation methods.
10
Business impact (k/yr)
Issue 2 July 2014
TOTAL
IMPACT
3500
3000
OPTIMUM
2500
RISKS OF
FAILURE
2000
1500
Balance point
but not optimal
1000
PREVENTIVE
ACTION COSTS
500
1 2
9 10 11 12 13 14 15 16 17 18 19 20
Maintenance or Life Cycle (months/years)

Figure 3. Optimum value achieved by optimising total cost/risk/performance impact.
Asset management decisions are often constrained by

factors which mean that the ideal solution (illustrated
in Fig 3) cannot be applied. Typical factors could be
budgetary constraints, resources, or regulation. The
asset manager needs to understand these constraints,
and optimise within them - as indicated above it may
then be possible to put a price on the constraint which
may lead to it being removed or mitigated.
An Asset Management System

Coordinating the many facets of asset management
requires a system of direction and control a
management system (which may include, but is far
more than, a software system). Both PAS 55 and ISO
55001 provide a checklist of requirements for such a
system, and cover the establishment of clear policy
and strategic direction, specific asset management
plans, operational controls and continual
improvement activities. They also identify a range
of enablers that have been found, by the many

organisations participating in the development of
the specification to be essential to the coordination,
efficiency and sustainability of a joined-up asset
management model.
Note, however, that the term Enterprise Asset
Management (EAM) system is sometimes used to
describe one of these enablers the software systems
used to hold asset information and to facilitate
work planning and control, materials management,
procurement etc. Care must be taken not to confuse
this with the overarching management system for
asset management.
Diagram 4 below shows the relationship between the
Asset Management System and the overall discipline
of Asset Management as descried in Section 5 of this
document.
11
Issue 2 July 2014
Relationship between key terms

Managing the
Organisation
Coordinated activity of an
organisation to realise value
from assets
Asset Management
Asset Management
System
Asset Portfolio
Set of inter-related or
interacting elements to
establish AM Policy, AM
objectives and processes to
achieve those objectives
Assets that are within the

scope of the asset
management system
Figure 4. Asset Management in the context of the Discipline of Asset Management.

[SOURCE: ISO 55000:2014]
ISO 55001 describes a management system for managing
assets, as illustrated in Figure 4. It sets out requirements
for achieving good practice, but does not actually prescribe
the activities it can best be thought of as a structure to
ensure that the organisation achieves what it sets out do in
a consistent and efficient manner by means of managing its
assets essentially through controlled processes.
Philosophically the practice of asset management does
not require that an organisation has to put in place
documented business procedures, standards, policies and
the like. However, for most businesses, in particular those
that seek to comply with ISO 55001, it is inevitable that
some of this will be required, and if done well it normally
brings great benefit. ISO 55001 does require some rigour
in management of the documents and records that form
12
the asset management system. The aim is to ensure that

documentation is fit for purpose and adds value. The
good news is that since all of the management system
standards require quality managed documents and
records, it is sensible and pragmatic to put in place one set
of document that satisfies all needs.
ISO 55001 does not tell an organisation how well it
needs to do Asset Management that is a decision that
is dependent on the business and the operating context it
works within. The 39 Subjects in this Anatomy describe
some aspects of Asset Management that go beyond
the requirements of ISO 55001 (and PAS 55). It is up to
each organisation to decide how much or how little of
the capabilities described in this Anatomy is important to
them.
Issue 2 July 2014
ISO 55001 sets out the requirements for a management system for assets in terms of:
Scope
Normative Reference
Terms and Definitions
Context of an organisation
Leadership
Planning
Support
Operation
Performance Evaluation
Improvement
The requirements for the management system are summarised in Figure 5 below.
Stakeholder and organisation context
Organisational plans and

organisational objectives
Asset management
policy
Strategic asset management
plan (SAMP)
Asset management
objectives
Asset management plans
Implementation of asset
management plans
Asset portfolio
Performance evaluation and improvements
Plans for developing

asset management
system + relevant
support
Asset management
system + relevant
support elements
Figure 5. Example
of key elements
within an Asset
Management
System
Note: The grey
highlighted box
designates the
boundary of the asset
management system.
[SOURCE: ISO
55000:2014]
13
Alignment within the management

system
The backbone to a good management system
for assets is the clear connectivity between the
organisation strategic plan (commonly called the
business plan) and the on-the-ground daily activities
(through all of the relevant connecting layers) of
individual departments (planning, engineering,
procurement, operations, maintenance, performance
management etc).
We call this the alignment (or line of sight) because
people on the front line need to have a direct visibility
of the reasons for their activities why the task
14
Issue 2 July 2014
is needed, not just how to do it. Such alignment

brings obvious advantages of prioritisation and
coordination of purpose, but it also helps to stimulate
creativity and innovation: staff who understand what
is important (and why) can often identify new and
better ways of achieving these goals.
Alignment goes both ways, of course. It also ensures
that senior management decisions and corporate
strategies are rooted in fact-based realities the
asset capabilities, performance, opportunities and
constraints. Feedback and continual improvement
are therefore key elements of an asset management
system and apply at many levels (see Figure 4).
Issue 2 July 2014
4. The Scope of Asset Management

People do Asset Management
The understanding of the principles of Asset
Management has developed significantly over the last
decade and a number of approaches, standards and
models have been developed across the world. It is
becoming increasingly necessary to align these various
approaches and to develop a global view, in particular
for companies that operate Asset Management
systems in many countries.
Asset Management differs, for example, from Quality
Management (e.g. ISO 9001), Lean, 6-SIGMA, Total
Productive Maintenance and so on, although it can
incorporate such methodologies. Asset Management
is best seen as an integration framework that
enables organisations to achieve their explicit aims
in a structured way. They may choose to use any
combination of tools and techniques to achieve these
aims, provided that they are appropriately applied and
deliver added value.
It is vital to remember that people do Asset
Management and therefore people, and their
knowledge, competence, motivation and teamwork
can make the biggest difference to good or poor
asset management - otherwise known as an Asset
Management culture. The tools and technologies may
be helpful, but the engagement of the workforce,
the clarity of leadership, and the collaboration
between different departments and functions are the
real differentiators of a leading asset management
organisation.
Similarly, Asset Management is not about just
managing the assets for their own sakes. Asset
Management is about deriving value from the assets
in a structured and predictable way. Even if the role
of the organisation is limited to the governance
responsibility for assets, there are plenty of
opportunities to optimise what is spent, and when, in

relation to the risks, obligations and liabilities incurred
and the value obtained.
The 39 Subjects and 6 Subject Groups

The IAM has been working with international partners
within the Global Forum on Maintenance and Asset
Management to achieve global consensus on a
common definition of the 39 Subjects that form the
core of the Asset Management Landscape . These 39
Subjects form the basis of the structure of Section 5 of
this Anatomy documents and are expanded on within
the IAMs Subject Specific Guidelines.
The 39 Asset Management Subjects are linked to
6 Subject Groups which in turn are reflected in the
conceptual model (see Figure 6).
It is important to understand that these 39 subjects
are intended to describe the complete scope of Asset
Management. Therefore any person who intends to
become demonstrably competent or expert in this field
will need to know enough of the complete breadth of
all the subjects in addition to any deep and detailed
expert knowledge in any one of them.
The IAM Conceptual Model

The IAM takes the view that there is no perfect model.
Instead we welcome a variety of useful models either
because they are preferred by some individuals or
because they explain a theory or practice in different
ways for different purposes.
The following section presents the current conceptual
model used by the Institute to which all the Subjects
and Subjects Groups are aligned.
The Conceptual Model is designed to describe the
overall scope of Asset Management and the high-level
15
groups of activity that are included within this discipline.

The Model highlights the fact that Asset Management
is about the integration of these groups of activity and
not just the activities in isolation. It also emphasises the
16
Issue 2 July 2014
critical issue that Asset Management is there to serve

the goals of the organisation. The essential alignment
of Asset Management activities with an organisations
goals is a concept that we continue to emphasise.
Issue 2 July 2014
The Asset Management Subject Groups are shown in the IAM conceptual model for Asset Management below.
Customers
Commercial
Environment
Investors
Legislation
Scope of Asset Management
Organisational Strategic Plan
Strategy & Planning
Acquire
Operate
Lifecycle
Delivery
Organisation
& People
Asset Management
Decision-Making
Dispose
Maintain
Risk &
Review
Asset Information
Copyright 2014 Institute of Asset Management (www.theIAM.org/copyright)
Figure 6. The IAM Conceptual Model

These Subject Groups are split into the following 39 Subjects.
Figure 7. The 39 Subjects of Asset Management
17
Issue 2 July 2014
5. Subjects Groups and Descriptions

Each Subject Group and each of the 39 Subjects are
described in more detail in the following sections.
These descriptions were developed by IAM members
and reviewed and edited by IAM Faculty to ensure
consistency across the 39 Subjects. The IAM is gradually
publishing individual Subject Specific Guidelines as
downloadable documents.
Although these Subjects are described individually,

they should be not considered as discrete Subjects.
The interrelationship between the Subjects and
the contribution they make as a whole to an
organisations Asset Management capabilities are an
extremely important aspect of the Asset Management
Landscape.
5.1 Strategy & Planning
Customers
Legislation
Commercial
Environment
Investors
Strategy & Planning
Acquire
Operate
Lifecycle
Delivery
Organisation
& People
Asset Management
Decision-Making
Dispose
Maintain
Risk &
Review
Asset Information
18
Issue 2 July 2014
The Strategy & Planning group contains the core

Asset Management activities required to develop,
implement and improve Asset Management within
an organisation, taking into account business and
organisational objectives and the effects of changing
demand over time on the asset portfolio. An Asset
Management Strategy contains documented
information that specifies how organisational objectives
are to be converted into asset management objectives,
the approach for developing asset management
plans, and the role of the asset management system
in supporting achievement of the asset management
objectives. Asset Management Plan(s) clearly explain
what the organisation plans to do with its assets to
achieve these objectives in terms of resources and
timescales with respect to Life Cycle activities such as
acquisition, maintenance, operation and disposal.
Strategy & Planning needs to consider the required
outputs from the assets, both now and in the future, and
the options for delivering these outputs for the optimum
whole life costs. In many organisations, this requires
consideration of an Asset Management Strategy
& Objectives over long time frames, for example 50
years, to ensure the long-term implications of Asset
Management Decision-Making are understood. It is
therefore important that the Strategy & Planning
activities are integrated with the Asset Management
Decision-Making activities.
Strategy & Planning also needs to take account of the
uncertainties associated with long-term planning. These
uncertainties could include:
What are the future levels of demand?

Will required levels of service change?
Will assets deteriorate at the assumed rate?
How will risks change over time?
What new technology will become available?
What are the future changes in legislation and

regulation?
What will the economic business environment be like in
the future?
It is important that the implications of these uncertainties
are understood in terms of likely impact on cost, risk and
level of service. This may necessitate the development
of Asset Management Strategies for a number of
different scenarios to reflect different assumptions around
these uncertainties.
The majority of the Asset Management Strategy is
concerned with the long term strategic requirements
of the physical assets. It provides direction and
guidance to enable the creation of investment and
maintenance plans essential to putting in place the
resources (including finance) to manage the assets
consistent with achieving desired outcomes. In parallel
with the requirements of physical assets, it is necessary
to consider the development of the asset management
system consistent with delivery of these plans. This
may include the improvement of business processes to
enable, for example, increased use of condition based
maintenance. It is inevitable that these improvements
are closely coordinated with other strategic plans for
enablers, these would typically include information,
human resources, training etc.
The Strategy & Planning Group covers the following
Asset Management Subjects:
Asset Management Policy

Asset Management Strategy & Objectives
Demand Analysis
Strategic Planning
Asset Management Planning
Each of these is now described in more detail.
19
5.1.1. Asset Management Policy

The Asset Management Policy states the high level
principles by which the organisation manages its assets. It
sets out the intentions and direction of an organisation as
formally expressed by its top management. It is formally
agreed and signed off an appropriate executive officer,
thereby demonstrating the organisations commitment to
Asset Management.
An Asset Management Policy is the cornerstone of an
organisations approach to Asset Management. As such
it provides both the confidence that the organisation
is translating its overall organisational strategic plan
into effective Asset Management Plan(s), and provides
the start of an organisations line of sight, the golden
thread of rationale which ultimately justifies every Asset
Management activity the organisation undertakes.
Alignment (or line of sight) is an essential concept for
effective Asset Management. The project manager or
technician at the sharp end of an organisation should
be able to trace the rationale for what he or she is doing
upwards through a clear set of plans, objectives and
strategic statements to something in the organisational
strategic plan (i.e. the organisations topmost vision).
This requires a clear framework within which Asset
Management Decision-Making is made and presented.
The purpose of the Asset Management Policy is to set
this framework out.
PAS 55 sets out a list of 11 requirements for an Asset
Management Policy which fall into five broad categories
(in no particular order):
Consistency is the Asset Management Policy
consistent with the organisational strategic plan,
other organisational policies, and in particular the
organisations overall approach to the management
of risk?
Appropriateness is the Asset Management Policy
appropriate for the nature and scale of the organisation?
Compliance is there a commitment in the Asset
Management Policy for the organisation to comply
20
Issue 2 July 2014
with all relevant mandatory regulations and laws,

whether voluntarily or not?
Principles and framework is there a clearly laid out
set of principles and a framework within which an
effective Asset Management System can be created?
Continual improvement is the Asset Management
Policy supported by top management, effectively
communicated and reviewed regularly, with a
commitment to continual improvement of the Asset
Management System it defines?
Many organisations have difficulty getting the right

balance for their particular circumstances. Some prefer
a single page Asset Management Policy which can
be pinned on all their notice boards for all to see. They
then understandably struggle to fit all the requirements
outlined above into a single page. In reality, an Asset
Management Policy does not need to be a single page,
but should not realistically stretch to more than a few
well-crafted pages. The main objective should be clarity
of thought and presentation, setting out as coherently as
possible how Asset Management will contribute to the
achievement of the organisational strategic plan.
Therefore the structure, length and content of the Asset
Management Policy will vary from organisation to
organisation, from a single document to a structured
group of documents, possibly with a single page Asset
Policy Statement for the notice boards. What is important
is to make clear to anyone reading it exactly how the
organisations Asset Management System works to
develop and maintain alignment or line of sight.
5.1.2. Asset Management Strategy &

Objectives
An Asset Management Strategy and associated
Objectives can be considered as the second stage of
decomposition of the organisations line of sight which
was initiated by its Asset Management Policy. ISO
55000 defines this as the Strategic Asset Management
Plan or SAMP. As described under Asset Management
Policy, alignment or line of sight is essential to effective
Issue 2 July 2014
Asset Management, ensuring the justification for all

Asset Management activities at the sharp end are clearly
justified at all levels in the organisation.
The Asset Management Strategy & Objectives should

define what the organisation intends to achieve from its
Asset Management activities and by when. This should
include both:
The current and future demand on and condition

and performance requirements of the organisations
assets and how the organisation intends to deliver
these future requirements;
The current and future Asset Management
capabilities of the organisation, i.e. its processes,
information, systems, people, tools, resources etc.
and how the organisation intends to develop its
future capabilities to a level of maturity necessary to
deliver its organisational goals.
A key requirement for an effective Asset Management

Strategy is the inclusion of Asset Management objectives
that are Specific, Measurable, Achievable, Realistic and
Time-bound (SMART).
The Asset Management Strategy does not have to be a

single document, in practice it often helps if it is presented
in smaller documents aligned to the organisations
normal way of working. Many organisations produce
separate Asset Class Strategies which define the strategies
and objectives for the different asset classes that an
organisation is responsible for but these needs to all align
with the overarching Asset Management Strategy &
Objectives. However this is undertaken, it is important
that a coherent set of Asset Management Strategy
& Objectives documents must be in place for an
organisation to be an effective Asset Manager. PAS 55 sets
out a list of 12 requirements for an Asset Management
Strategy which fall into seven broad categories (in no
particular order):
Consistency is the Asset Management Strategy

consistent with the Asset Management Policy
(and hence the organisational strategic plan) and

other organisational policies and strategies?
Risk-based Approach is the Asset Management
Strategy risk-based in its approach, i.e. does it
prioritise activities according to the criticality of
the asset or Asset Management activity under
consideration and the levels of risk associated with
each one?
Life Cycle Approach does the Asset Management
Strategy explicitly consider the Life Cycle of the
assets and the interdependencies between each of
the Life Cycle stages?
Framework does the Asset Management Strategy
set out a clear framework for the development of Asset
Management objectives and plans which includes the
appropriate level of optimisation, prioritisation, and
management of information?
Stakeholders does the Asset Management
Strategy include an assessment of how stakeholders
will be engaged and communicated with?
Functional, performance and condition requirements
does the Asset Management Strategy identify
present and future functional, performance and
condition requirements for the assets and how the
organisation plans to meet these?
Continual improvement is the Asset Management
Strategy supported by top management, effectively
communicated, and reviewed regularly to ensure it is
still fit for purpose in meeting the Asset Management
Policy and organisational strategic plan?
The biggest challenge facing any asset intensive

organisation is creating an Asset Management Strategy
that clearly maintains the alignment initiated by the Asset
Management Policy. Many organisations find the
development and introduction of an Asset Management
Framework helps with this. Within the Asset Management
Framework the structure and content of the Asset
Management Strategy is clearly defined, with the
relationships between documents set out in the form of
a top-level diagram and the development of lower level
document templates to support the consistent generation
of each document within the framework.
21
5.1.3. Demand Analysis

When developing the Asset Management Strategy
& Objectives, an important element to consider is the
current and forecast demand for the product or service
being produced and how this demand translates into
the outputs required from the organisations assets. In
some cases organisations will find it simple to develop a
good understanding of future demand and take it into
consideration in their strategic plan but for others this may
be more difficult. It is therefore important to undertake
a structured demand analysis before fully developing
the Asset Management objectives and developing the
organisations Asset Management Plan(s).
Demand Analysis involves a market review on the
expected future demand, incorporating historic figures,
external data and analyses and statistical models. The
aim is to forecast demand for the product or service being
produced and the requirements this demand will impose
on the organisations asset portfolio. In Demand Analysis
there are several elements that need to be considered:
Historical demand
Change in demand over time
Price changes over time
Changes in required levels of service
Impact on the future performance, condition and
capability of an organisations assets
Other factors that have to be incorporated include price

elasticity, marketing elasticity, income elasticity, and cross
elasticity. The elasticity identifies what the demand or
price will do as a result of the factor itself. For example if
a product or service is price inelastic it means that a large
change in quantity of sales does not change the price
of the product or service. Although well understood
as economic concepts, these can be difficult to model
and calibrate for a given situation hence the need for
careful not cursory analysis to assess not only the central
prediction but the levels of uncertainty that surround
it. Consideration also needs to be given to the impact of
regulatory prices controls for organisations working in a
regulated sector.
22
Issue 2 July 2014
Naturally, the level of uncertainty tends to increase the

longer the forecast horizon and this uncertainty needs
to be reflected in the Strategic Planning processes
and the resulting Asset Management Strategy &
Objectives. The Strategic Planning processes also
need to consider the capacity and capability of the
assets to deliver the forecast demand and how this may
limit an organisations ability to service an increased
demand for a product or service.
One of the main reasons to perform an analysis such as
the demand analysis is to be able to forecast the return
on assets or return on investments utilising a normal Net
Present Value (NPV) method based on the incremental
costs and revenues for each of the strategic asset
investments identified. Building and optimising a NPV
model and incorporating the demand analysis allows the
asset manager to run different scenarios and to optimise
the Asset Management Strategy and resulting Asset
Management Plan(s).
It may be necessary to develop different scenarios for the
future demand on the organisations assets to reflect the
uncertainty of this future demand. This is discussed further
in Strategic Planning below.
5.1.4. Strategic Planning

An integrated strategic planning framework and
associated processes underpin and help ensure
consistency when developing work volumes and cost
estimates across different asset groups. The Framework
and processes should:
establish levels of rigour appropriate to the varying
criticality of the different assets hence generating
funding requirements across the different asset
groups which are consistent and reflect the assets
potential to impact the business goals.
describe how asset information and renewal
and maintenance policies are used to develop an
organisations Asset Management Strategy &
Objectives.
provide guidance on the most appropriate method
Issue 2 July 2014
to develop work volumes, cost schedules and output

measures for different types of asset including the
use of appropriate decision support tools.
describe how Demand Analysis and required outputs
are considered and modelled in the development of
the organisations proposed maintenance, renewal and
enhancement work volumes.
enable organisations to develop work volumes and
costs for different scenarios to reflect potential
changes in demand, output requirements or funding
constraints. The development of different scenarios
will enable organisations to more clearly articulate
the impact of funding constraints in terms of impact
on performance, risk and cost.
describe how confidence levels in asset information
and unit costs will be determined and how this will
the impact on the confidence levels in the resulting
work volumes and costs in the Asset Management
Strategy & Objectives. The use of confidence
levels will help internal and external stakeholders
to understand the relative maturity of the work
volumes and costs within the plan compared to the
criticality of the different asset groups.
reflect the criticality of different asset types in the
approach to determining work volumes and costs
to ensure the level of rigour in the development of
the Asset Management Strategy & Objectives
is proportional to the criticality of the different
asset types.
Ultimately, the Strategic Planning processes should

describe how an organisation intends to ensure that the
Asset Management Strategy & Objectives will be
delivered through the day to day delivery plans used by
the organisation and how any variations between these
different plans are handled.
5.1.5. Asset Management Planning

Asset Management Planning is undertaken to
determine how assets will be managed, over a specific
period of time, to achieve the Asset Management
Objectives in accordance with the Asset
Management Strategy. For example, this could be
to maintain current customer service and/or to improve
customer service or environmental service in specific
areas for a given level of funding.
An organisations Asset Management Planning
processes will produce Asset Management Plan(s) that
define the activities that an organisation intends to
undertake in order to deliver these objectives. These
activities could include capital investment to build new
assets, capital investment to renew life-expired assets,
an operational maintenance regime, disposal of assets,
and rationalisation of assets or education campaigns.
For example an Asset Management objective to reduce
sewer flooding of properties could be achieved by a
combination of a number of activities, not limited to,
but including:
providing protection at domestic properties e.g. by
installing flood gates
capital investment to replace sewers, overflows and
pumping stations
maintenance activities to remove tree roots
a customer education campaign to reduce disposal
of unsuitable items in the sewer that can lead to
blockages and flooding such as fats, oils, greases
and nappies
The decision about the optimum blend of activities
necessary to achieve a specific objective would be
analysed using the approaches described in the Subject
Group Asset Management Decision-Making.
23
Responsibilities should set out who leads each activity

and which part of the organisation or its suppliers
will carry out each activity. It may also specify how
decisions are made and who is responsible for Asset
Management Decision-Making.
The resources needed to deliver each activity should
be identified and this may include human, financial,
physical, natural and knowledge resources. The
plans may also specify how the plan will be funded,
for example from central government, shareholders,
borrowing or changes to charges.
Within the Asset Management Plan(s) each activity should
24
Issue 2 July 2014
have timescales to describe when it will be delivered and

when the benefits will be achieved.
The Asset Management Plan(s) may also describe
how the plan has been justified and how activities &
resources have been optimised to deliver the lowest
whole life cost or value. The justification describes the
costs and benefits associated with delivering the Asset
Management objective.
In addition Asset Management Plan(s) may also include
information on current assets and their performance,
on stakeholders engagement and how the plan will be
approved, monitored, reviewed and updated.
5.2
Issue 2 July 2014
Asset Management Decision-Making
Customers
Legislation
Commercial
Environment
Investors
Strategy & Planning
Acquire
Operate
Lifecycle
Delivery
Organisation
& People
Asset Management
Decision-Making
Dispose
Maintain
Risk &
Review
Asset Information
The key to making good Asset Management decisions

is acquiring appropriate knowledge and applying
this within a robust decision-making framework. An
Asset Management Strategy should be in place
which is derived from and aligned with the Asset
Management Policy.
Having a consistent Asset Management Policy
and Asset Management Strategy & Objectives
provides a stable framework to allow joined up

Asset Management Decision-Making. The Asset
Management Policy provides the overarching
principles which are in place to enable the Asset
Management Strategy & Objectives and Asset
Management Plan(s) to be produced and implemented.
The Asset Management Strategy would typically
contain the criteria to be used to optimise Asset
25
Asset Knowledge is also a crucial element in Asset

Management Decision-Making. Asset Knowledge
required about the assets can be grouped into the
following areas:
Strengths and Weaknesses: Understanding the
criticality of your assets and the condition of the
assets.
Opportunities: the action that can be taken to
improve the condition of the assets, new technology
or skills that can be brought into the organisation to
improve Asset Management capability.
Threats: the risks to performance and to understand
the mitigating actions that can be put into place to
manage these risks.
Asset Management Decision-Making is crucial at all
elements of the asset Life Cycle and should be made
in a coordinated fashion to optimise whole life value
given any underlying constraints, statutory legislation
or regulatory obligations.
Asset Management Decision-Making is typically
undertaken in parallel with Strategic Planning and is
key to developing optimised Asset Management Plan(s).
Asset Management Decision-Making is sometimes
undertaken for specific one-off decisions, for example
to optimise a major investment scheme and the output
would be included in the Asset Management Plan(s).
However, for more generic decisions, for example
the optimum renewal policy for assets in widespread
use, Asset Management Decision-Making can
be undertaken once and embodied in asset specific
policies. These policies would then be combined with
Asset Knowledge to develop work volumes and costs
for the portfolio of assets within the Asset Management
Plan(s). The outputs from the application of these
policies need to be continually reviewed to ensure they
are in line with the assumptions made during the Asset
Management Decision-Making processes.
26
Issue 2 July 2014
The Asset Management Decision-Making Group is

made up of the following Subjects:
Capital Investment Decision-Making

Operations and Maintenance Decision-Making
Life Cycle Value Realisation
Resourcing Strategy
Shutdowns & Outage Strategy
Each of these is described in more detail below.
5.2.1. Capital Investment Decision-Making

The timing and costs of new capital programmes
have a significant impact on an organisations success
but are often based on relatively simple assumptions
or historic expenditure run rates. In most sectors,
stakeholders are making increasing demands for more
detailed justification of capital expenditure which
the simple traditional approaches cannot deliver.
When these demands are combined with inadequate
asset data and information, plus uncertainty over
asset deterioration rates and future maintenance
costs the justification is difficult and requires a more
sophisticated approach.
Capital Investment Decision-Making is based on
an understanding of probable asset degradation and
trading-off investments (CAPEX), maintenance costs
(OPEX), risks and their probabilities in order to optimise
a capital investment decision. The optimisation can
be in terms of timing, the choice of asset or both.
In order to do this effectively, the costs and risks
associated with an asset, and how these vary through
time or with usage, need to be understood. Life
Cycle cost analysis is typically used to determine the
intervention(s) that represent the lowest Life Cycle
costs. The diagram below shows a simplified example
of how annual costs may vary for a given asset or
asset system.
Issue 2 July 2014
Renewal Cost
Mid-life
Overhaul
Routine
Maintenance costs
increase towards
end of life
Increasing
Failure Risk
Routine
Maintenance
Declining
Condition
Age / Usage
Cost
Condition
Risk
Figure 8. Life Cycle Cost Analysis
In practice, there are often external constraints that impact

an organisations ability to intervene at the optimum time
(for example Technical Standards & Legislation or
funding constraints) but Life Cycle cost analysis will help an
organisation to understand the whole-life implications of
any sub-optimal intervention in terms of increased future
costs and risks.
population view or Prior Model, can be updated using

sample data so a representative sample is not required.
Bayesian statistics handle variable quality data, and the
models can be updated with actual degradation and
costs over time.
For very long-life assets where degradation information

is poor or very complex asset systems where there
are interdependencies between different assets or
components, statistical analysis can help with Capital
Investment Decision-Making. In many cases Bayesian
statistical tools are used. With Bayesian statistics, a
Normally, manufacturers and equipment suppliers provide

a list of maintenance and inspection tasks to be carried
out at recommended intervals for an asset. It is not
uncommon for these to be adopted by the user. However,
being generic, these take little or no account of the
operating environment of the asset in question. There
5.2.2. Operations & Maintenance DecisionMaking
27
is increasing pressure to reduce operational expenditure

and as with Capital Investment Decision-Making,
maintenance regimes need to be justified to demonstrate
the value of the maintenance spend to the organisation.
To support informed Operations & Maintenance
Decision-Making, maintenance strategy analysis
techniques such as Failure Mode and Effects Analysis
(FMEA), Reliability-Centred Maintenance (RCM) and
Risk Based Inspection (RBI) can be used. These tools
are designed to build maintenance regimes and plans
appropriate for the different failure modes and the different
consequences that result from those failures of the asset.
120
Premium Paid to
meet reliability target
Risk-Based Maintenance (RBM) analysis techniques can

be used to enhance the RCM process to
optimise maintenance intervals for a cost-effective
level of reliability and risk. The key to a risk-based
approach is understanding and quantifying the
trade-off between the cost of undertaking
maintenance and the increasing risks associated with a
deteriorating asset. Although it difficult to be entirely
accurate in establishing this relationship, this trade-off,
and the determination of the optimum maintenance
interval in terms of the lowest Total Business Impact,
the theoretical outcome is shown in the diagram
below.
Premium Paid to
meet cost target
Total
Business
Impact
Annual Costs (s)
CalculatingOptimumLife_vers1_0
100
80
Economic
Optimum
60
Issue 2 July 2014
Risk Cost
40
20
0
Direct Cost
1
10
Maintenance Frequency (weeks)
Figure 9. Optimising Maintenance

These techniques can be used to develop robust
maintenance regimes in the form of maintenance standards
or specifications that can be fully justified from both a cost
and risk perspective to internal and external stakeholders.
The Execution of these maintenance activities is described in
the subject Maintenance Delivery.
28
A quick internet search will reveal many examples

of implementations of these techniques - some
successful, some less so. A common mistake is the
application inappropriate levels of analysis and overconfident statements that the outputs provide the
optimal combination of maintenance cost and residual
Issue 2 July 2014
failure risks. This does not mean they are bad tools
but users should be aware of the limitations of any
technique before applying it. For example, a standard
RCM process has difficulty showing that the level of
reliability being achieved is actually optimal or costeffective. i.e. it may be more appropriate for a business
to accept a lower level of reliability where the cost
of achieving higher reliability is disproportionate. It is
therefore important to carefully evaluate whether or
not a particular tool or methodology is appropriate to
the task in hand before pursuing a potentially costly
implementation.
should consider and value risk exposures, sustainability

(of asset performance, financial, social, environmental
and other impacts) and any relevant intangibles such
as reputation, client satisfaction, staff morale etc.
5.2.3. Life Cycle Value Realisation
revenues or other service outcomes) are calculated over

the life of the assets or asset systems. In many cases,
the performance benefits and some risk types are only
encountered or quantifiable at the asset systems level,
whereas costs may be incurred more commonly at the
individual assets level. Life Cycle Costing is therefore often
used in evaluating options relating to individual assets,
whereas Value Optimisation is most easily achieved and
demonstrated at the asset system level and whole portfolio
levels (see Figure 10 below). The LCC & VO opportunities,
When developing optimised Asset Management

Plan(s), there are many things to be considered and
multiple drivers to be taken into account. Stakeholders
are taking an increasing interest in the extent to
which an organisation can demonstrate that its Asset
Management Plan(s) are value-maximised over an
appropriate time horizon. This is often the full Life
Cycle, but may be constrained by contractual or other
factors to a shorter time frame. The best value plan
Life Cycle Value Realisation in practice means the

combination of Capital Investment Decision-Making
and Operations & Maintenance Decision-Making
processes to support decision making and maximise the
value obtained from assets over the life of the asset. The
techniques used to achieve this are referred to as Life
Cycle Cost & Value Optimisation (LCC & VO), in which
the costs, risks and asset performance benefits (e.g.
Typical priorities & values

Corporate/
Organization
Management
Life Cycle
Activities:
efficiency &
effectiveness
LI
COFE C
ST YC
IN LE
G
Systems performance,
cost & risk optimization
OP
Portfolio return on investment

compliance & sustainability
TI VA
M LU
IS E
AT
IO
N
Keeping stakeholders happy
Manage Asset Portfolio
Manage Asset Systems
Manage individual Assets over their Life Cycles
Figure 10. LCC and VO usages in the management of asset portfolio
29
and the methods employed to realise them, can vary in

decisions made during different asset Life Cycle stages. It
is generally accepted that in the early phases of an assets
life (design, creation or acquisition), the evaluation of Life
Cycle Costs and exploring options to optimise Life Cycle
Value have a disproportionate significance on the overall
cost of ownership of the asset. These techniques counter
short-termism through deliberate inclusion and valuation
of asset attributes such as reliability, maintainability and
sustainability. For Example, avoiding the lowest initial cost
options with known problems or high costs emerging later
in the assets life.
Capital Investment Decisions made without proper
LCC and VO processes, may not sufficiently address the
trade-off between initial capital investment and operating
or maintenance costs. Likewise, without a Life Cycle view,
individual Operations & Maintenance Decisions may
not consider opportunities to reduce maintenance or raise
reliability through renewal or design modifications.
The costs incurred during different asset Life Cycle phases
are often materially impacted by decisions made earlier in
the Life Cycle. For example, whereas only 10-20% of the
entire Life Cycle cost might be incurred during the design
or create/acquire stage, over 80% of the subsequent
operating and maintenance costs (and asset performance
characteristics) will typically be determined at this stage. It
is important to consider all phases of the Life Cycle at the
design stage of any significant investments. Life Cycle
costs should be modelled for different design options to
understand their impact on the Life Cycle costs and the
asset Life Cycle. In addition, the costs of asset disposal
are generally increasing, largely due to environmental
considerations, so it is important that decommissioning
and disposal costs be considered in Life Cycle cost models.
Asset Life Cycle Costing and Value Optimisation
have significant contributions to make to the Asset
Management Strategy & Objectives and should be
30
Issue 2 July 2014
used to optimise and demonstrate delivery of value within

all critical Asset Management Plan(s). As well as reducing
overall costs and raising value, such processes improve
risk management transparency and raise stakeholder
confidence in the organisations sustainability.
It should be recognised that ageing assets represent a
particular challenge for asset managers. After a long
period of stable operation, new failure modes can
emerge. This is particularly challenging if the transition is
not recognised, decisions made with the assumption of
stability and predictability may not be appropriate for this
new stage of the Life Cycle. While the eventual physical
failure of an asset may be inescapable, the economic endof-life situation or functional failure can be missed. This is
particularly true when lifetimes are measured in years or
decades and the asset manager may not have seen the
asset type at the end of its life before.
The end of an assets economic life is generally
characterised by a loss of performance, increasing
operating costs, falling reliability, an unacceptable increase
in the risk of catastrophic failure. The change may be
driven by external forces such as legislative changes or
changing requirements but the outcome for the asset
remains the same. The key point being that the continued
operation of the asset is uneconomic, even though it may
continue to function at an acceptable output level. The
development of an Ageing Assets Strategy can help to
not only recognise conditions for an economic end-of-life
situation, but also to forecast it far enough in advance to
allow appropriate mitigation.
There are a range of options to manage the end-of-life of
an asset or system. The simplest approach is to react to
functional failures, sometime referred to as fix-on-fail. This
can be appropriate and effective for low-criticality assets those with low consequences of failure. Even for highvalue assets, fix-on-fail can be a valid approach where there
is redundancy built in to the system and the failure rate is
Issue 2 July 2014
low. This approach has taken by many utility companies

over a number of decades, due to the redundancy and
resilience built in to the original network designs.
Where it is advantageous to do so, an alternative approach
is to replace assets prior to functional failure. This is an
economic decision as while a planned replacement can
involve considerable capital expenditure, the costs and
consequential losses associated with unplanned failure
may be many times higher. The section on Capital
Investment Decision-Making earlier explored some
of the techniques to determine the optimum time for
planned replacement. In the highly regulated environment
in which many asset owners operate, these costs are
driven higher still by stringent requirements in terms of
service performance, safety legislation and environmental
concerns. It is therefore important to determine
these costs to enable planning of cost-effective asset
replacement.
When faced with large numbers of critical assets
moving towards the end of life, the planned approach
often becomes more attractive. For example, electricity
companies have in recent years moved towards this
model by attempting to forecast asset performance
and plan renewal. This approach has helped to prevent
a large increase in failures and ensured that customer
service standards have been maintained. In this
environment, the key question changes from What is
the condition of the asset? to When will the condition
of the asset become unacceptable? Such forecasting
techniques are a key component in the development of
an effective Ageing Assets Strategy.
If fix-on-fail and planned replacement represent two
extremes of approach and for many assets, there are a
range of specialised solutions designed to slow the onset
of end-of-life. These range from simple changes to
maintenance techniques to extensive asset refurbishment
programmes. The determination of the most efficient
strategy requires analysis of the available life extension

options, the future needs for the asset, the costs of asset
disposal and an assessment of the costs and benefits of
alternative interventions.
The aim of an effective Ageing Assets Strategy should
be to enable the identification and prediction of the
end of economic life and the efficient management
of assets as they approach this phase. The
implementation of such a strategy should provide
asset managers with the tools they need to determine
the most cost-effective strategy for the ageing assets
under their stewardship.
5.2.4. Resourcing Strategy

As described earlier, Asset Management Plan(s) are derived
from the long-term Asset Management Strategy &
Objectives designed to ensure that the organisational
strategic objectives are achieved in a way that reflects
priorities, optimises cost, risk and performance, and is
sustainable. Asset Management Plan(s) need to include all
significant activities related to managing asset performance
and risk, which means both capital and revenue
expenditure.
To deliver these plans requires an appropriate
Resourcing Strategy which reflects the changes
in requirements over the planning horizon. The
Resourcing Strategy considers the skills and resources
available to develop an optimal and realisable solution
which may include a mix of internal and external
(contracted) services. Identifying the appropriate mix
can be a complex problem influenced or constrained by
external factors, working practices and political or union
considerations. It is normal for organisations to identify
which resource requirements are core capabilities that
need to be developed or retained in-house, and which
are non-core capabilities which are more appropriate
to buy in. This decision will be influenced by market
availability of suitable suppliers over a period matching
31
the plan as well as the desires of the organisation.

The level of in-source versus outsource is a strategic
decision, which should be set out clearly in the
Resources Strategy.
Organisations that mainly outsource are often described
as thin asset managers. For them, it is strategically
important to retain the in-house capability to specify,
manage and monitor outsourced services. The
Resourcing Strategy and resultant in-house capabilities
have a direct influence on the general procurement
strategy supporting the procurement of services through
turnkey contracts, partnerships, framework agreements
and other vehicles. An appropriate procurement
strategy supports contractual commitments
compatible with the resource requirements in the
Asset Management Plan(s). To be realistic and
realisable, the Resourcing Strategy must consider of
the relevant supply chains to ensure that capabilities
will be available to meet the plan from outwith or
Cost per Annum
inside the organisation (see Contractor & Supply

Management).
The Resourcing Strategy is heavily influenced by the
changing requirements of the business, technology
changes and workforce demographics. This feeds
the HR Strategy or People plan to ensure that the skill
sets available are matched to those needed over the
life of the plan. This includes developing competency
through, succession management, recruitment,
training, performance management and personal
development planning.
The Resourcing Strategy is not only about skills.
The availability of critical spares or raw materials
is an important factor in achieving targets. As
with Maintenance decision making, there are well
established tools and techniques for optimising spares
that consider the cost holding spares versus the risk of
spare unavailability as shown in the diagram below.
Risk for number

of spares held
12,000
Issue 2 July 2014
Cost of
spares held
10,000
8,000
6,000
4,000
2,000
0
10
Number of Spares
Figure 11. Optimising Spares Holdings
32
Issue 2 July 2014
However, many organisations find this difficult and

spares are often not procured or overstocked for a
number of reasons. When considering spares holding,
it is important to recognise obsolescence and shelf
life as well as opportunities for using modular and
standardised spares which can be used to replace a
variety of assets. The tools and techniques for this
analysis are widely publicised and much has been
written on Capital, Critical and Strategic Spares holdings
as well as the theory and formulae for optimising stock
levels and Economic Order Quantities (EOQ).
The Resourcing Strategy should define how specialist
tools are to be managed, ensuring that they are
available, matched to work requirements, calibrated,
inspected and maintained as appropriate. The
accountabilities for this must be clear and management
rigorous as failings in test equipment have a
disproportionate impact on the organisations objectives.
It is often possible to create savings by rationalising
specialist tools and putting them into a managed system
but this is normally a secondary objective to assuring
safe and effective use of such tools.
Materials management is normally achieved as an
integral part of the production process or project
management and the Resourcing Strategy should
define how an organisation intends to approach this.
Efficient and effective delivery of the Asset Management
Plan(s) require that material scheduling is matched to
the activities and properly under control, particularly
where lead times are long or uncertain. In some cases
additional stock may be retained (or delivered early) in
order to mitigate risk of the consequences of stock out.
Matching and optimising the resources to the Asset
Management Plan(s) is a part of the wider process of
prioritisation and optimisation. The Asset Management
Plan(s) require alignment and optimisation based on a
number of criteria, including resources and will often
need to consider the opportunities of aligning work and
bundling it into packages for execution to maximise

availability of asset systems (see Shutdowns & Outage
Strategy).
5.2.5. Shutdowns & Outage Strategy

For many industries, planned plant or system
shutdowns and outages are an essential part of
Asset Management. They are required to facilitate
maintenance, inspection or project work which cannot
be executed when assets are operating. Whilst such
shutdowns may be essential to ensure asset safety and/
or regulatory compliance, from a production perspective
they are undesirable as they disrupt output or reduce
service levels.
Shutdowns and outages also introduce specific risks
associated with interrupting stable processes and
systems. Shutdowns and outages are expensive to
execute and often require large amounts of scarce or
skilled labour resource to be mobilised and set to work
in a limited space over a fixed duration. All outages
are followed by a start-up phase which is by its nature
a high risk period where infant mortality or recommissioning problems occur. An organisation would
typically develop a Shutdowns & Outage Strategy
which optimises the trade-off between asset operations
and the need to perform work on the assets and
considers the various risks and resource constraints.
In some cases, the initial drivers for a shutdown interval
become irrelevant. However, where a shutdown recurs
at a specific interval, a cycle of re-enforcement can
develop where staff defer work to the opportunity
of the shutdown, thereby establishing an increased
demand for the shutdown and making the interval a
self-fulfilling prophecy.
Development of a Shutdowns & Outage Strategy
involves a robust, auditable processes carried out
by a multidisciplinary team, to assesses whether a
task must be done in the shutdown. Those that
33
are shutdown dependent are subjected to cost,

risk and benefit analysis to define their individual
optimal interval, i.e. where the Total Business Impact
is a minimum (see Operations and Maintenance
Decision-Making for a description of Total Business
Impact). These tasks are assembled into a work list
or schedule so that the optimal schedule of work
can be determined. Optimising the whole shutdown
and outage schedule may involve moving tasks from
their individual optimal periodicity as the resultant
combined cost, risk and benefit values will represent
the lowest Total Business Impact for the work
programme. Often this work is done using decision
34
Issue 2 July 2014
support tools as the permutations available grow

rapidly.
While the development of a Shutdowns &
Outage Strategy is a logical process, supported
where appropriate by technology, moving from a
traditional shutdown interval strategy to one that is
optimised can require a significant cultural change.
This is an important factor to consider when making
the transition to a more optimised approach (see
Organisational Structure and Organisational
Culture).
5.3
Issue 2 July 2014
Life Cycle Activities

Customers
Legislation
Commercial
Environment
Investors
Strategy & Planning
Acquire
Operate
Lifecycle
Delivery
Organisation
& People
Asset Management
Decision-Making
Dispose
Maintain
Risk &
Review
Asset Information
The Subject Group on Asset Management DecisionMaking explored approaches to many of the tradeoff decisions Asset Managers are typically faced
with. However, it is in the Asset Management Life
Cycle Delivery Activities where the majority of the
expenditure is incurred. Consequently, there are significant
opportunities to identify efficiencies through good
practice Asset Management in these Life Cycle Delivery
Activities. Opportunities which are matched with
significant risks if these activities are not well managed.
The Life Cycle Delivery Activities should not be

considered in isolation as individual activities or
rigidly bound by the sequence in the diagram above
- Operations and Maintenance (O&M) go hand in
hand and many O&M cycles may take place before
the ultimate disposal of an asset. Although the
decisions about what assets to acquire may have
already been taken, a full Life Cycle approach to Life
Cycle Delivery Activities should be adopted. The
clearest example is the importance of considering
35
the Maintenance Delivery phase of the Life Cycle

at the Asset Creation & Acquisition and Systems
Engineering phases of the asset Life Cycle to ensure
maintainability issues are incorporated into the design.
Similarly, considering the Asset Disposal phase at
the Asset Creation & Acquisition and Systems
Engineering phases of the Life Cycle can influence
the disposal costs through the engineering design,
construction methods or material selection.
Issue 2 July 2014
system shall include documented information for

applicable legal and regulatory requirements (clause
7.6.1).
For the organisation, the Life Cycle is not a once

through process and it is important that lessons
learned during Maintenance Delivery and
In many sectors, technical standards and legislation

are moving towards a risk-based approach which
defines the required outputs or goals rather than
defining the inputs or controls to be put in place. This
type of technical standard / legislation is aligned to
the Asset Management approach to decision-making
endorsed by the IAM. They allow each organisation
to set an approach appropriate for the organisation.
However, many technical standards and legislation
Operations are feedback to the Asset Creation &

Acquisition and Systems Engineering activities to
continuously improve the design of assets and systems.
were developed several years ago, before this style

emerged and often define very specific interventions
and periodicities.
The Life Cycle Delivery Activities Group contains

the following Asset Management Subjects:-
Where technical standards or legislation cause an

Asset Management activity to be undertaken that is
suboptimal, it is important to understand the cost
of this sub-optimal intervention. An example of this
might be legislation that requires an inspection to be
undertaken every 3 months, but an analysis of costs
and risks (see Operations & Maintenance DecisionMaking), reveals that the optimum time to undertake
the inspection is every 12 months.
Technical Standards & Legislation

Asset Creation & Acquisition
Systems Engineering
Configuration Management
Maintenance Delivery
Reliability Engineering
Asset Operations
Resource Management
Shutdown & Outage Management
Fault & Incident Response
Asset Decommissioning and Disposal
5.3.1. Technical Standards & Legislation

Most organisations have to comply with a range of
internal and external technical standards as well as
various pieces of legislation. The Strategic Planning
processes and Asset Management DecisionMaking processes clearly need to take account of
these technical standards and legislation in developing
the Asset Management Plan(s). It is an ISO 55001
requirement that an organisations asset management
36
If this cost of compliance is significant, it may be

worth challenging the relevant technical standard or
legislation. Where the standard is set internally, this
may be relatively straightforward, leading to significant
benefits to the organisation. Where the standard is
defined externally, particularly where interventions are
defined in legislation, it may still be worth challenge
these with the relevant authority but the effort of the
challenge will clearly be more significant.
It is also important that organisations have in place
appropriate arrangements for the periodic assessment
of compliance with the relevant Technical Standards
and Legislation. Reports from the assessment
of compliance would typically be reviewed by an
Issue 2 July 2014
independent compliance committee within an

organisation (see Management Review, Audit &
Assurance).
5.3.2. Asset Creation & Acquisition

Once an organisation has decided that new or
different assets are required to achieve the strategic
plan (see Capital Investment Decision-Making), a
choice must be made as to how to create or acquire
these. The four most common delivery strategies
chosen by organisations, either singularly or in any
combination are:
acquisition of existing assets from another
organisation
building new assets either on green field sites or
add-ons to existing facilities
replacement of existing assets at the end of their
service or economic life
refurbishment of existing assets to extend their
service life
The choice of delivery strategy may be supported by
tools that compare the Life Cycle cost and benefit
of each option as part of the Capital Investment
Decision-Making process. For larger investments, the
creation phase is likely to be managed through one or
more projects, each with its own set of deliverables,
time, cost and quality project success criteria that align
with the strategic plan and form a programme of work.
Each organisation will have its own project /
programme management processes to meet its own
requirements. A typical set of capital governance
processes can be found in the Association of
Project Management (APM) approach and Body of
Knowledge; other popular methodologies include
PRINCE and PMI. In all of these, projects are managed
through a Project Cycle divided into phases, separated
by governance gateways where progress to the next
phase is approved.
Concept phase establishment of a project team

that includes the asset manager in the role of project
sponsor. The project deliverables/benefits and success
criteria (typically constraints such as funding, health
and safety and customer targets) are confirmed by the
project team.
Definition phase exploration of one or more
options and selection of the one that will best meet
the project deliverables within the constraints of
the project success criteria. Investment appraisal
models are generally used to support the decision
making process where there is more than one option.
Typically the Net Present Value whole-life cost and
cost/benefit ratio are calculated.
Implementation phase procurement and delivery of
the solution to time, cost and quality targets.
Handover and closeout phase hand over of the asset
to the end user - generally the operator/maintainer.
The sponsor determines whether the expected
benefits have been realised and the project team
reviews how the project was delivered and identifies
lessons to be learned.
IT tools are often used to develop and monitor
the project schedule and plan, capturing, costs
including manpower, plant and materials. Where
multiple projects or resources are managed within
a programme, various techniques are available to
maximise the opportunity to deliver as efficiently as
possible. For example, a flat expenditure or resource
profile is preferable to one that has peaks and troughs.
Project Management is a significant discipline in its
own right and there are several bodies which provide
support and guidance in the field.
5.3.3. Systems Engineering

Asset Management cannot be successfully conducted
based on individual assets, but must take into
consideration the whole asset system that considers
the interrelationship and dependencies between
the key assets. Systems Engineering in an Asset
37
Management context is the practice of ensuring

effective planning, optimal design, performance,
performance operation and maintenance at an asset
system level.
This tends to be practiced in industries with complex
and possibly dynamic assets, where relationships
between assets can be several times removed from
physical or functional points at which they have an
influence. Systems Engineering will be applied
at the design of the system, or sub-components,
for complex asset systems, and this complexity will
normally prevail when maintaining the system.
Systems Engineering includes the consideration and
Issue 2 July 2014
apportioning of Reliability, Availability, Maintainability

and Safety (RAMS) requirements and the consideration
of interfaces with existing assets or systems.
Systems Engineering also includes the development of
functional and technical specifications, safety approval
of equipment, installation processes and acceptance
processes including the comparison of the assets that are
delivered with original RAMS requirements.
A typical Systems Engineering approach is shown in
the V-diagram below. This shows how the requirements
are apportioned through the design process on the lefthand part of the V and components are integrated and
validated into an overall system on the right-hand part of
the V to meet these requirements.
Business
Requirements
FRACAS
Monitoring
Operational
Requirements
Operational
Proving
Scope
& Function
System
Testing
Outline
Design
Sub-System
Testing
Detailed
Design
Manufacture
Component
Testing
Factory
Acceptance
Testing
Key
Process Flow
Assessment
Validation
This V Diagram is based upon
EN50126
demonstration of Reliability,
Availability, Maintainability &
Safety (RAMS) in Railway
Applications
Figure 12. Systems Engineering V Diagram

A good practice approach to Systems Engineering can be found in ISO 15288, Systems and Software
Engineering, System Life Cycle Processes.
38
Planning
Resources
Time
Issue 2 July 2014
Logistics
Maintenance
Plan
Systems Engineering
-Requirements/Function Analysis
Contractual
Allocation & Synthesis
Provisions
RFP & Contract Input
MANAGEMENT
AND PLANNING
Documented CM Process
Product & Document
Ident (Naming, Marking,
Serialisation, etc.)
C
Mgt
Support
Working
Relationships
Doc Types
Status &
Configuration
Information
Performance
Measurements
Training &
Guidance
Resources
& Facilities
CM Planning
Documented
CM Process
Communication
Program Initiation
CONFIGURATION
IDENTIFICATION
Need for
Change
ECPs, RFDs
Approved
Changes
Change Ident,
Documentation
& Disposition
C
CONFIGURATION
CONTROL
Approved
Configuration
Documentation
Approved
Configuration
Documentation
Approved ECPs, RFDs
& Implementing
Direction/Authorisation
Status &
Configuration
Information
CONFIGURATION
STATUS
ACCOUNTING
C
Physical CI/CSCI Test
Results, Mfg & Engng
Tools/Documentation
CONFIGURATION
VERIFICATION
& AUDIT
Verification,
Validation,
Action Items
Confidence
Verified
Product &
Validated
Process
Figure 13. Configuration Management
5.3.4. Configuration Management

Configuration Management identifies the functional and
physical attributes of components, software and related
documentation at various points in time, including
identifying links between items within a system. It
provides a process for systematic control of changes
to the identified attributes of items for the purpose
of maintaining integrity and traceability throughout
the Life Cycle. This sometimes seen as part of a wider
Management of Change (MOC) process and is integral to
good Project Management and Asset Creation &
Acquisition.
A good top-level overview of configuration
management is provided in the following diagram
above, sourced from the military standard MIL-HDBK61A, Configuration Management Guidance.
This diagram provides an overview of the principles of

configuration management which can be described as
follows:
Configuration Management and Planning this element is the overall establishment of
the documented controls and mechanisms
for undertaking Configuration Management,
which includes the elements of Configuration
Identification, Configuration Change Control,
Configuration Status Accounting and Configuration
Verification & Audits, as defined below.
Configuration Management Planning includes the
requirement to produce appropriate Configuration
Management Plans.
Configuration Identification - configuration
identification is the process of identifying a
39
configuration item (a hardware and/or software/data

product) and its defining attributes. The attributes
of a configuration item are recorded in configuration
documentation and base lined, with a formal
configuration change control process applied to
manage changes to the configuration items defining
attributes and associated baselines.
Configuration Control - configuration control is a set
of processes and approval stages required to manage
any changes to a configuration items defining
attributes and to re-baseline them as necessary.
Configuration Status Accounting - configuration
status accounting is the process of recording and
reporting on a configuration item and its defining
attributes, as well as any associated configuration
baselines, at any given moment in time.
Configuration Verification & Audits - configuration
audits can include functional and physical
configuration audits. A functional configuration
audit would ensure that any defined functional
and performance attributes of a configuration item
have been implemented/achieved, while a physical
configuration audit ensures that a configuration item
is installed in accordance with the requirements of its
approved supporting documentation.
Issue 2 July 2014
maintenance is optimised to ensure that the service and

performance requirements are achieved at minimum
whole life cost. As previously stated, this should
start with the design of the assets, accommodating
maintainability and supporting integration of assets
into operation. However, the operating context,
objectives and constraints generally change over the
course of asset life, asset condition may deteriorate
and few organisations start with a clean sheet.
Maintenance management includes the need to keep
the arrangements under review and deliver the optimal
maintenance strategy at the time.
Maintenance is itself a broad term with many specialist
disciplines and professional bodies. In the context of
Asset Management, the maintenance strategy / plans
for an asset or system need to be determined and
documented in line with the Asset Management
Strategy & Objectives and Asset Management
Planning activities. In broad terms, maintenance
tasks can be divided into three groups:
The overall objective of maintenance is to ensure

that the assets continue to meet their service
and performance requirements including safety,
environmental and output parameters. Selection of
the appropriate maintenance and inspection regimes
to achieve this objective is outlined in Operations
and Maintenance Decision-Making above.
Maintenance Delivery refers to the effective and
efficient coordination of the resources needed to
deliver the chosen regime.
Inspection, Testing & Monitoring - non-intrusive checks

to confirm safety and integrity of assets and to provide
information for determining maintenance and renewal
needs. This may include the use of remote monitoring
systems.
Preventative Maintenance - planned maintenance
undertaken to prevent (reduce the risk of) faults,
failures or excessive deterioration from occurring. The
criteria for initiating preventative maintenance may be
time-based, condition based or usage based but should
always take account of risk.
Corrective Maintenance - activities performed to repair
defects, damage or a shortfall in performance / outside
specified limits and where work is necessary to bring
the asset up to standard and keep it operational.
The operation and maintenance phase of the Life Cycle

can last a significant time and account for a significant
proportion of an organisations annual budget. It is
therefore important that the planning and delivery of
The maintenance strategy or plan for an asset or

system blends tasks from these groups to maintain
performance.
5.3.5. Maintenance Delivery
40
Issue 2 July 2014
Maintenance Delivery is informed by Data &

Information and includes the need to retain records of
inspections and measurements in order to understand
asset performance and plan accordingly. Maintenance
interventions - even the corrective ones - need to be
scheduled and logistical support arranged, for example
access, plant, tools, spares, consumables. In many
organisations, the level of planning and coordination
needed is large and this activity is often managed using
a Maintenance Management System tool.
The scope of maintenance management and the
remit of those responsible for it in an organisation
are often broad and include legal and commercial
accountability for:
Meeting legislative, environmental or safety
requirements and standards.
Ensuring asset inventories, configuration and
interfaces are maintained.
Managing the supply chain.
Ensuring the competence of resources.
Providing technical and quality assurance.
Considering manufacturer warranties and provision of
specialist support services.
5.3.6. Reliability Engineering

Reliability is defined as the ability of an item to perform
a required function under given conditions for a given
time interval in ISO 60050 (191), Quality Vocabulary,
Availability, Reliability and Maintainability Terms.
Reliability Engineering is the systematic application
of engineering principles and techniques throughout
a product Life Cycle to ensure that a system or device
has the ability to perform a required function under
given conditions for a given time interval. Reliability
Engineering is an ongoing process starting at the
conceptual phase of a product design (including
defining system requirements) and continuing
throughout all phases of a product Life Cycle. The
goal always needs to be to identify potential reliability
problems as early as possible in the product Life Cycle

and ensure that the reliability requirements will be
met. Changes to a design are orders of magnitude
less expensive in the early part of a design phase rather
than once the product is manufactured and in service.
Reliability Engineering consists of four key
fundamentals:
Reliability deals with potential events - this
means that failure is regarded as a probabilistic
phenomenon: and the likelihood of failure may
be random or can vary over time according to a
distribution (probability density function). Reliability
Engineering is concerned with delivering a specified
probability of not failing, at a specified statistical
confidence level.
Reliability is predicted on required function generally, this is taken to mean operation without
failure. However, even if no individual part of the
system fails, but the system as a whole does not
do what was intended, then it is still assigned to
the system reliability. The system requirements
specification is the criterion against which reliability
is measured.
Reliability applies to a specified period and seeks to
ensure that components and materials will meet the
requirements during the specified period. Note that
units other than time may be used, for example km
or number of cycles.
Reliability activities are restricted to operation
under stated conditions. This constraint is necessary
because it is impossible to design a system for
unlimited conditions.
Reliability Engineering processes are well documented
and many excellent texts have been published on this
subject. The key activities undertaken by reliability
professionals include the following:
Participate in the planning stages to ensure that
resources for a good Reliability Engineering program
41
are being allocated.

Prepare a reliability program plan by listing the
required reliability tasks, when it should be performed,
who will use the results, and the resources (time,
people, money) that the task will use.
Calculate the allowable system failures for each
system component.
Conduct a Failure Modes, Effects and Criticality
Analysis (FMECA) see Operations &
Maintenance Decision-Making.
Evaluate the reliability potential of alternative
designs.
Ensure that all components in a design will actually
behave as the designer anticipates and that they will
have suitably long lives.
Provide information to designers on how to improve
the life of a system and its ease of maintenance.
Provide information to maintainers by defining the
maintenance requirements.
Formulate and run tests on components, subsystems,
and the system itself.
Investigate user complaints and field failures. Set
up processes to ensure that information about
field failures is timely, accurate, well organised, and
targeted at those who can do something with it.
Being predictive, Reliability Engineering models

rely on statistical techniques and can be daunting
or misleading to the untrained. To assess the
reliability of a system, it is necessary to construct a
model that represents the times-to-failure of the
entire system based on the probability density function
of the components, subassemblies and/or assemblies
from which it is composed, as illustrated the diagram
below.
Lognormal
Welbul
Component
A
Issue 2 July 2014
Component
B
System A
f(t)
Exponential
Component
D
or MTBF
Figure 14. Reliability Engineering
Once a system or a group of assets are operational, the

model can be refined by incorporating actual failure data.
This feeds off the good practice of recording
as-found conditions and the Root Causes of any failures
that occur. Such data capture typically involves the use
of a Failure Recording and Corrective Action System
42
(FRACAS). It is important that any such system captures

data in a way that is consistent with the FMECA that
was undertaken to enable feedback - of actual failure
rates for different failure modes - to the Operations &
Maintenance Decision-Making process to inform the
choice of maintenance or inspection intervention.
Issue 2 July 2014
5.3.7. Asset Operations

In most cases, Asset Operations deliver the product
or service to the customer and are an important
contributor to achieving an organisations objectives.
It is therefore important that Asset Managers provide
guidelines to Operators about how to operate the
assets within the appropriate design, maintenance
and operational parameters. This may include the
development of an Asset Operations strategy and
plan which would outline the approach, activities and
resources involved in managing and implementing
operations.
An Asset Operations strategy would define the
organisations approach to ensuring that the assets
or assets systems meet their functional requirements,
are operated to deliver the required service level, meet
all statutory and technical requirements for health,
safety, security and reliability and achieve and sustain
defined levels of physical, functional and financial
performance.
An Asset Operations Plan would describe the
activities necessary to deliver the Asset Operations
Strategy and would include consideration of how the
operations activities could impact on:
Effective risk management

Extended asset life
Reduced operating and maintenance costs
Compliance with statutory obligations
Provision of a healthy and safe work environment
Improved performance of asset systems
Investment predictability through a Life Cycle
approach
Asset performance aligned with users expectations of
productivity and service delivery
Improved user satisfaction
Enhanced community perceptions.
Key risks associated with an inadequate Asset
Operations strategy and plan could include:
Asset loss or systems failure, including consequential

financial loss
Reduced asset life
Breach of statutory obligations
An unhealthy or unsafe environment and
consequential liabilities
Inefficient systems performance
Unpredictability of performance and expenditure
demands
Loss of esteem with stakeholders.
One of the common contributory factors in these risks
is operational error and for many years the trend has
been to reduce risk through:
Greater automation of system control

Better equipment and assets
In-built protection in equipment
Inherent fail safe designs
Better maintenance.
However, operator errors in many organisations

continue to be a cause for concern. Techniques such
as Total Productive Maintenance (TPM) and Ergonomic
studies at the time of design are now being used to try
to design out the potential for operational error at the
design stage of the Asset Management Life Cycle. The
appropriate use of these techniques should be defined
in the Asset Operations Strategy.
5.3.8. Resource Management

The Resources Strategy & Optimisation Subject
described earlier covers the approach to optimising the
use of resources at the time the Asset Management
Plan(s) are put together.
Resource Management examines how an organisation
implements the Resources Strategy in terms of planning
and allocating resources to Asset Management activities
to enable the Asset Management Plan(s) to be carried out
efficiently and safely. Resource Management includes the
efficient management and delivery of the following:
43
Human resources (taking into account any specific

Competence Requirements);
Spares and Inventory;
Plant & Equipment;
Tools; and
Vehicles and special equipment.
Resource Management includes the analysis of
current resources against future requirements, and the
evaluation of work priorities and risks where there are
insufficient resources. It includes the use of project
management tools and techniques to ensure the
efficient delivery of these resources.
5.3.9. Shutdown & Outage Management

Optimising shutdown intervals is a developing area of
interest within the Asset Management community (see
Shutdowns & Outage Strategy) and this can bring
significant benefit in terms of optimising the interval
and duration of shutdowns and outages. In terms
44
Issue 2 July 2014
of implementing this strategy, it is essential that the

shutdown or outage is managed in the most efficient
and effective way to minimise direct costs and lost
opportunity.
Shutdown & Outage Management is essentially
gathering engineering activities which require assets to
be shut down into a programme of work and managing
these as such. Each task within the shutdown window
needs to be carefully planned to manage conflicting
requirements for; resource, material, tools, equipment
or access and to ensure that the correct sequence of
actions is executed. The tasks often vary in complexity
from simple inspections to integrated asset/asset system
overhauls. A large increase in human resource, normally
contractors, is often required and significant logistical
issues can arise when ensuring that material, parts and
specialist tools/equipment are available at the time of
the shutdown. All of this must be done with due
consideration of health, safety and the environment,
Issue 2 July 2014
within budget and in the allotted shutdown duration.
response evaluation and lessons learned.
Shutdown & Outage Management does not begin

when the asset comes out of service. It is a continual cyclic
process with varying levels of activity during the cycle.
Shutdown intervals are typically many years leading to
the experience base within the organisation being eroded
through organisational change, promotion and retirement.
Key to the long term sustainability of Shutdown &
Outage Management is the recognition that dedicated
shutdown management arrangements are required.
Fault & Incident Response should be aligned to

maintaining or recovering service outputs following
unplanned events, and mitigating the consequential
effects. As service output can often be a defining
measure for asset performance, the approach to
Fault & Incident Response should be considered in
the Asset Management Strategy and the Fault &
Incident Response activities included in the Asset
Management Plan(s).
Shutdown & Outage Management is a fundamental
The Fault & Incident Response approach should
business activity and the associated management

processes need to form part of the organisations
business management processes. These processes and
their performance management measures must be
linked to the organisations strategic goals. They identify
the key elements of the shutdown management cycle,
for example scope exploration, scope freeze, detailed
planning, execution and post-shutdown review prior to
the next shutdown or outage. The activities within these
typical phases and the timeframes at which they are
required will be dependent upon the complexity of the
shutdown or outage.
consider the criticality of the different assets and the

potential for incidents to impact on service or outputs and
should make proportionate and appropriate preparations.
Although shutdowns and outages are cyclic events,

their management is a continuous business activity
requiring robust processes and tight control to realise
the opportunities presented and avoid their huge
inherent risks.
5.3.10. Fault & Incident Response

Fault & Incident Response is the ability of an
organisation to plan for and respond to asset
failures and non-asset incidents in a systematic and
appropriate manner. This includes incident detection
and identification, identification of appropriate
response resources, information management and
communications, competence of response teams,
use of standard responses, temporary and permanent
repair procedures, site access and hand-back,
reporting, updating of asset information systems and
Clearly, the degree to which asset managers and

operational teams can prepare for unplanned incidents
varies according to the assets and the corresponding
service. For example, no amount of planning can
significantly reduce the time taken to shut-off very
large diameter water mains, irrespective of the
resources on hand. However, in such circumstances
the provision of alternative supplies to affected
customers and measures to clean up the affected area
will be enhanced by effective planning for the incident.
Fault & Incident Response also includes the evaluation
of the causes of failure which may require a detailed
technical investigation for more serious failures or
incident to ascertain the root cause. Lessons learned
from the response to Faults & Incidents should be
evaluated, captured and where appropriate implemented
in terms of improved processes and practices.
5.3.11. Asset Decommissioning and Disposal

Although some assets have extremely long lives,
there comes a point where they are removed from
service. For many organisations, there is a rolling
programme of asset renewals and refurbishments to
deliver improvements to the assets, address existing
serviceability issues and deliver enhanced serviceability
45
Issue 2 July 2014
outputs against the targets set by the Business. For

others, there are less smoothed approaches.
Implications based upon the outputs of the

Environmental Impact Assessments, risk assessments
As part of any Asset Management Strategy there

should be continuous reviews with regard to the
effectiveness or viability of the assets in question and
drivers for asset rationalisation and disposal decisions
could include one or more of the following:
Rationalisation of assets where there is an over

capacity, often where required capacity or service
levels have changed over the years, is an area of Asset
Management that many organisations overlook. There
can be significant benefits from reducing the number
of assets employed, even where these assets have
significant remaining lives. Such decisions should be
subject to an evaluation of costs, risks and benefits (as
described in Capital Investment Decision-Making)
against the operational needs of the business.
Changes to standards rendering the assets unsuitable

for the latest requirements.
Changes to the required level of service
Changes to the required capabilities the asset or asset
systems are expected to achieve
Changes to Health and Safety legislation rendering
the assets unsuitable for operation or viable for
decommissioning / disposal.
Changes to financial constraints e.g. decision made
to move production to another site.
Assets become beyond their useful life, for example
uneconomical repair.
Ageing assets expected to become obsolete or
unsupportable
46
It is often the case that, over the life of an asset, the most
significant cost is that of operation and maintenance
and not the design and construction. However, asset
decommissioning and disposal costs can also be significant
and are frequently a differentiator when considering
options for capital investment. Understanding these costs
and feeding them into the Capital Investment DecisionMaking processes is therefore an extremely important part
of Life Cycle costing.
5.4
Issue 2 July 2014
Asset Information
Customers
Legislation
Commercial
Environment
Investors
Strategy & Planning
Acquire
Operate
Lifecycle
Delivery
Organisation
& People
Asset Management
Decision-Making
Dispose
Maintain
Risk &
Review
Asset Information
Asset intensive organisations rely on asset data,

information, knowledge and wisdom2 as key enablers
in undertaking both strategic Asset Management
activities and operational activities. These four terms
are widely used to segment what is an ever expanding
area or work.
Data - Numbers, words, symbols, pictures, without
context or meaning, i.e. data in a raw format, e.g.
25 metres.
Information - A collection of data expressed with a
2
3
supporting context e.g. The span of the bridge is 25

metres.
Knowledge - A combination of experience, values,
information in context, and insight that form a basis
for decision making.
Wisdom - The result of evaluation of and
understanding of knowledge. It is sometimes
defined as the ability to increase effectiveness3.
Wisdom can be considered to be the output of the
whole asset management system and is not explicitly
explored further in this section.
http://en.wikipedia.org/wiki/DIKW
Rowley, Jennifer; Richard Hartley (2006). Organizing Knowledge: An Introduction to Managing Access to Information. Ashgate Publishing,
Ltd. pp. 56. ISBN 978-0-7546-4431-6
47
In general, data and information can be improved

through a specific management approach that is set
out in an overall Asset Information Strategy. This
defines the activities an organisation will undertake
to ensure that its asset information meets current
and future requirements. In the context of asset
management, information typically includes:
Records of the existence of a physical asset,
collectively known as an asset inventory or asset
register.
Attributes about these assets e.g. make, model,
serial number, age, rated capacity, etc.
Attributes of the asset systems, e.g. capability,
capability.
Location, spatial information, dependencies, and
connectivity information especially in Geographical
Information Systems (GIS).
Logical groupings e.g. systems, equipment types,
zones, etc.
Access requirements e.g. permits, right of way
requests, safety related information
Performance information about the asset. This can
be subjective (from experience & knowledge) or
objective (from measurements and data). It covers
information such as asset reliability, condition and
serviceability assessments.
Historical records of past events and work carried
out on the asset; either during short, medium, or
long term planned activities or as the consequence
of unplanned tasks (e.g. breakdown repairs).
Documents, design models and drawings, and
photographs of the asset.
o Asset types: an understanding of the types of asset
within the asset management system and how
they are represented in data is critical, for example;
- Point assets, Linear assets, Area assets, Volume
assets, System level assets
o Meta data This is data that describes data
Issue 2 July 2014
data locations and data qualities

o Data Attributes a quality or feature as a
characteristic or inherent part of an asset. Types of
attributes can be further broken down to
- Function
- What
- Condition
- Topography spatial, photogrammetry
- Topology e.g. component, command & control,
telemetry, energy, functional and operational
relationships
- Capability
- Utilisation
- Cost
- Risk
- Failure modes
o Intervention data
- Workbank maintenance, renewal,
enhancements & failures
o Unstructured data user manuals, drawings
The IAMs Asset Information Guidelines provide further
detail on this subject.4
Asset Information Standards are used to define
explicitly the data and information that is required,
why the data is required, how it is collected and
measured, the format it is required in, who should
provide it and when it shall be provided. The ISO 8000
series of standards provide useful guidance on the
management of asset information.
Asset Information Systems, are the collection of
processes, applications and technology, utilised to
automate Asset Management processes and to enable
consistent decision support analysis. These are often
integrated but must always share the same key fields
and codes to avoid misinformation to achieve a single
version of the truth.
including its structures, data types, business rules,
4 http://theIAM.org/knowledge/iam-project-work/subject-or-sector-specific-guidance/asset-information-guidelines-aig
48
Issue 2 July 2014
The quality of Data & Information should be assessed,

understood and managed in order to ensure that it
provides effective support to business decision making
and processes and that these processes include suitable
controls based upon assessed data quality. Typically,
asset intensive organisations do not have all the
asset information they would ideally require, and the
information they have may not be to the required quality.
Therefore, organisations will need to assess and prioritise
data gathering and data cleansing activities to focus on
areas that will be beneficial. Further guidance can be
found in the IAM Asset Information Quality Handbook.5
The Asset Knowledge Enablers Group contains the
following Asset Management Subjects: Asset Information Strategy
Asset Information Management
Asset Information Systems
Data & Information
5.4.1. Asset Information Strategy

Asset information is a combination of data about assets
used to inform decisions about how they are managed.
Good asset information enables better decisions to be
made, such as determining the optimal asset maintenance
or renewal frequency for an asset. The decision may
be based on information regarding the assets location,
condition, probability and consequence of failure, work
option specifications and costs, constraints such as
resource availability, and other business priorities, such as
compliance with regulatory requirements.
An Asset Information Strategy should define how
an organisation intends to collate, maintain, utilise and
dispose of asset information to support both strategic
planning and Life Cycle delivery activities. The Asset
Information Strategy should take into account the Life
Cycle costs of the provision, collection and maintenance
of asset information and the value the information
5
adds to the organisation in terms of improved decisionmaking and support the day-to-day delivery of Asset
Management activities. The Asset Information Strategy
should be demonstrably aligned with an organisations
Asset Management Strategy & Objectives and Asset
Management processes.
An Asset Information Strategy should include
considerations of:
Key decisions and the information required to support
these;
Relationship with the end-to-end business process for
Asset Management;
The proposed approach to defining information
requirements taking into account the costs of providing
asset information and the value of the information;
Information flows and the overall logical data model;
Data management and governance arrangements;
The costs, benefits and timescales for delivery of
improvements to asset information;
Main outcomes and functionality required from Asset
Information Systems;
Core Asset Information Systems required;
A description of how different asset information systems
(both existing and proposed) will integrate;
A strategy for migrating both data and users from
existing systems to new systems.
The Asset Information Strategy should contain

objectives relating to the proposed improvements in asset
information that are Specific, Measurable, Achievable,
Realistic and Time bound (SMART).
Internal and external stakeholder consultation should
be undertaken to ensure that the Asset Information
Strategy captures their information and access
requirements. The Asset Information Strategy
should be been signed-off by the appropriate
stakeholders within the business.
http://theIAM.org/wiki/IAM_Asset_Information_Quality_Handbook
49
5.4.2. Asset Information Standards

Asset intensive organisations rely on asset data,
information and asset knowledge as key enablers
in undertaking both strategic Asset Management
activities and operational activities.
Asset Information Standards are required to ensure
that asset information is collected, categorised and
provided to agreed levels and to agreed timescales.
Standards for the measurement process also determine
the link between the data and its meaning (for
example height is height above ground, condition is
tested by standard method).
Asset Information Standards will typically include: Classification of assets to an agreed topology in
order to allow an overall asset inventory to be
created and managed.
Definition of the required attributes and their
respective quality criteria that should be gathered
and managed for each asset type and what these
attributes represent.
Common approaches to the assessment and
recording of the condition of an asset in order to
support strategic Asset Management planning.
Common methods for categorising asset defects
and failures for use in planning remedial actions to
improve service and reliability.
Defined approaches to the assessment and recording
of the performance or serviceability of an asset to
support long and short term planning activities.
Agreed methods for assessing and recording the
utilisation of an asset to help determine overall asset
lives and intervals between intervention activities.
Issue 2 July 2014
of the decisions that are made using the Asset

Information.
5.4.3. Asset Information Systems

Asset Information Systems are the applications,
software systems and other systems that collect, store,
process and analyse the asset information that an
organisation requires to manage its assets over their
Life Cycle. These systems ideally store, or are integrated
with, a register of all of the company assets. This allows
integrated planning and operational activities to be
effectively undertaken.
Asset systems can range from complex integrated
Enterprise Asset Management (EAM) suites to mixed
environments of Best of Breed software, bespoke
applications and spreadsheet based analytics. The
optimum mix of applications will depend on the size
and complexity of the organisation and the nature of
the regulatory environment it operates in.
Typical Asset Information Systems include: -
Asset Information Standards should also define the

level of quality and accuracy that is appropriate for
An asset register to detail the assets of interest to an

organisation.
A Geographical Information System (GIS) and / or
topological systems to record the location and spatial
details of assets.
Work management systems to plan and record work
activities related to an asset.
Logistics systems are required to manage the
storage, issuing and use of materials and spares.
Possession management systems are used to plan
access to assets for work activities.
Demand management systems will forecast how
demand on assets will change over time.
Decision Support Tools such as investment modelling
systems are used in strategic planning activities.
Process, telemetry and SCADA systems provide a
the different types of information, taking into account

the criticality of the different assets and the criticality
record of how well assets have performed and are

meeting their service requirements.
50
Issue 2 July 2014
Common data environments.

Condition monitoring systems monitor key condition
indicators of assets, such as temperature and
vibration, to help predict possible future failures.
Mobile working devices.
Across the Asset Management Life Cycle, different
functions of an organisation will have an interest in the
asset and will require asset information presented and
manipulated in differing formats, therefore it is just as
important to have a robust reporting system as part of
the asset information systems.
Note that there is not a clear dividing line between Asset
Information Systems and other enterprise/corporate
systems - information in asset information systems
may be used for wider organisational purposes and
information in enterprise/corporate systems may support
asset management objectives. For example training and
competency records in enterprise HR systems may support
decisions about who can/should respond to a defect.
5.4.4. Data & Information Management

Asset intensive organisations rely on Data &
Information as key enablers in undertaking both
strategic Asset Management activities and operational
activities.
Asset Data quality is a generic term to cover a
number of specific data quality measures, these
include: Accuracy the data is a true reflection of the
physical entity it represents.
Completeness - a complete set of data is available
for each data record.
Consistency - data is consistent in its definition,
rules, format & value.
Validity - all data held complies with data storage
rules.
Timeliness - Data reflects the current state of an
asset and complies with organisational standards for

data update timescales.
Uniqueness - all keys should be unique with no
duplication of data.
Organisations should assess the quality of their data,
and then develop a data population plan to ensure
that missing, or sub-standard data can be acquired
within acceptable timescales. It is acceptable for an
organisation to decide not to gather missing data
if it would not be beneficial, so long as this has
been decided at a suitable level in the organisation.
Processes for the provision of asset information
resulting from asset interventions (e.g. asset
replacements) should be specified. Business decisions
must incorporate suitable controls based upon actual
data quality.
Asset Knowledge is a more subjective topic and can
be influenced in many different ways. Knowledge is
derived from the combination of experience, values,
information in context, and insight and can be reliant
on key individuals to recall specific events or to know
where key information is stored. The quality of this
understanding will affect the reliability and quality
of decision making, for example, forecasts of future
behaviour require good knowledge and not just
good data. A key challenge for organisations is to
ensure that such personal knowledge and insights are
secured and made more widely available for future
decision making and to counteract the potential loss
of knowledge when staff leave an organisation or
when control of an asset passes from one organisation
to another. Concepts like BIM (Building Information
Modelling) are increasingly being used to prevent loss
of knowledge (and information) at key stages in the
Life Cycle of an asset.
51
5.5
Issue 2 July 2014
Organisation and People

Customers
Commercial
Environment
Investors
Legislation
Strategy & Planning
Acquire
Operate
Lifecycle
Delivery
Organisation
& People
Asset Management
Decision-Making
Dispose
Maintain
Risk &
Review
Asset Information
Asset Management is a way of thinking that puts a

new light on everything an organisation does. Often,
it calls into question traditional ways of looking at
things, existing structures, roles and responsibilities
and contractual relationships. This this can make
the introduction of asset management thinking and
practices an uncomfortable experience for people, in
the boardroom, on the front line and in the supply
chain. The lessons learned by early adopters strongly
suggest that these issues should be addressed sooner
rather than later.
52
The Organisation & People Enablers Group contains

the following subjects:
Procurement & Supply Chain Management

Asset Management Leadership
Organisational Structure
Organisational Culture
Competence Management
These subjects are highly interdependent and all exert

strong influence on an organisations ability to adopt
Issue 2 July 2014
and embed asset management successfully. The

purpose of, and the main justification for investing
in these enablers is to produce the performance
and behaviours that are needed to deliver the Asset
Management Strategy & Objectives.
The relationship between Asset Management
Strategy and these subjects is multifaceted. Each has
implications for the other which need to be defined, risk
assessed and actively managed if a strategy is to prove
successful. They are important mechanisms for delivering
the level of business integration that characterises more
mature asset management capability. The five subjects
are summarised below:
Effective Asset Management organisations are
clear on what activities can be outsourced and
what needs to be kept in house. Their approach
to Procurement & Supply Chain Management
reflects strategic objectives for cost, risk, quality
and performance management. They develop and
manage supplier and contractor capabilities and
relationships with long term Asset Management
goals in mind.
Asset Management Leadership is required at all
levels to ensure Asset Management strategies and
plans are not undone by conflicting perspectives
amongst departments, professional functions or
work groups on what constitutes best value or by
a lack of clarity on organisational objectives and
priorities.
Organisational Structure should complement
rather than contradict the Asset Management
Strategy. Senior management needs to give
careful consideration to where asset management
responsibilities sit in the organisation, lines
of reporting and communications, roles and
responsibilities to make sure they are conducive
to information sharing, cross functional working,
multidisciplinary teamwork and other features of
good asset management behaviour.
Organisational Culture is important because it
has a profound effect on what people perceive
as good and believe is possible, how they behave

and how committed they feel. A key role for
senior management is to proactively shape the
organisational climate and cultures that are both
conducive to Asset Management thinking and
tailored to their specific Asset Management goals.
Competence Management is concerned with
making sure that enough suitably competent people
are available to match the demands of individual
roles and work effectively in teams. A systematic
approach to defining competence and behavioural
requirements, selecting and developing staff,
deploying and developing them and managing
their work are the hallmarks of best practice Asset
Management organisations.
Each of these is described in more detail in the following
sections.
5.5.1 Procurement & Supply

Chain Management
One of the challenges facing organisations that
embrace whole life, whole cost asset management
is how to embed this in the way they manage their
suppliers. For many, the shift from short cycle contracts
to longer-term relationships involves changing the
habits of a lifetime. Collaborating with suppliers is
nothing new. Research indicates that organisations
which use their supply chains strategically are still in
a minority.
In mature asset management organisations,
Procurement & Supply Chain Management is
fully aligned with the Asset Management Strategy
& Objectives and cost-risk assumptions. They work
in partnership with suppliers to develop the mature
capabilities and efficiencies they need to achieve. The
most successful organisations approach their supply
chains in the same way as they would any of their
other critical assets. They apply the same principles and
are focused on the same issues, such as making the
relationship between supplier performance and asset
value transparent.
53
Asset Management organisations are clear on what

activities can, and should be, outsourced and what
needs to be kept in house. In reaching these decisions,
they:
Issue 2 July 2014
relationships, are unlikely to generate longer term

relationships required to underpin successful asset
management.
5.5.2 Asset Management Leadership

Consider the criticality of the work required relative to
their asset management objectives, their volumes of
work, management overheads and the availability of
competent staff.
Identify and set objectives for their suppliers, and
consider how best to deploy contracted staff and
integrate them into their own workforce.
Specify procurement requirements and service level
To understand Asset Management Leadership, it

is necessary to understand what it means to be an
effective leader. There are many different ways to be
an effective leader and people with quite different
personalities, styles and approaches can be successful.
However, all leaders need to be able to do the following
things well:
agreements and assess the criticality of individual

supplier relationships to overall asset management
strategy, objectives and plans.
Ensure that asset management activities achieve
organisational objectives.
Engage in effective supplier recruitment activities,
develop clear criteria and processes for choosing
suppliers and design effective contracts that fit their
asset management policy.
Consider how best to incentivise suppliers and build
sustainable relationships with their suppliers that
ensure their capabilities meet service level needs.
Use appropriate performance indicators to monitor
and manage supplier contracts that minimise the
introduction of risk into the business.
Monitor their suppliers commercial circumstances
and ownership to ensure that relationships are viable
and ongoing.
Decide how best to make the transition from one
supplier management approach to another.
Give the group (organisation, function, team, etc.)

direction. In the context of Asset Management this
means that leaders must have a clear vision of how
the organisation can optimise the use of its assets
and gain maximum benefit from them, be able to
clearly articulate this vision and to communicate it in
a persuasive and practical way.
Make the difficult decisions. Difficult is not the same
as complex. Difficult Asset Management decisions
are those where the problem is ill defined and
non-routine and where the decision requires tough
choices to be made which affect both individuals
and the organisation as a whole. The key here is that
leaders need to be decisive in the face of ambiguity.
Inspire staff to achieve organisations goals.
Give confidence to stakeholders of the direction
being taken and the benefits that will be achieved.
Designing contracts that deliver these requirements

is vital to aligning supplier expectations, obligations
and rights with the asset management strategy.
For example, in some circumstances, it may be
counterproductive for asset maintenance contracts to
This means that they have to be able to motivate staff.

There are a number of ways in which leaders can
motivate their staff. For example, they can act as a role
model, provide the necessary organisational support,
treat people as individuals and provide incentives, both
psychological and tangible, which will work for each
individual, and so on. The best leaders have an armoury
of such techniques which they mix and combine as
be shorter than the life of the assets being maintained,

whereas in others the focus might be on aligning the
contract term with service level requirements. Forms of
contract which suit short term, or generate adversarial
appropriate. However, more than that, they need to

be trusted by their staff. To be trusted you need to be
consistently fair and just and show that you are prepared
to take the heat when problems arise.
54
Issue 2 July 2014
Leading is not the same as managing or supervising.

Managers and supervisors plan, organise, control and
make sure that work gets done. They do this in situations
where work and procedures are defined. Leaders are not
needed in this situation. They are, however, important in
defining, developing and implementing such procedures
and systems in the first place.
Asset Management Leadership is, therefore, crucial
in an organisation aspiring to deliver effective Asset
Management as this leadership will set the direction
and priorities for the development of the organisations
asset management capabilities that are necessary to
deliver the organisations overall objectives.
The situation will be different for organisations which

have other structures such as bureaucracies, project
based companies, matrix organisations or loosely
based network businesses. This is why Organisational
Structure is such a key issue. Position asset management
wrongly in the organisation chart at an early stage in its
development and it could be years before its potential
benefits are realised.
The key is to have organisational structures (and cultures)
that support the achievement of organisational goals
and objectives, have clear commitment of leadership, are
applied consistently, are viable and a clear line of sight
between top management and staff working on the
ground.
5.5.3 Organisational Structure

One of the most common questions relating to asset
management is Where should we put it? There is no
right answer to this, no right place to put it. The answer
depends on how your organisation is structured, how
asset management is perceived by senior management
and the level of Asset Management maturity in the
organisation.
In traditional, hierarchical organisations, where functions
and departments work to separate agendas and their
work is integrated at the top, accountability for asset
management ought to lie in the senior management
team, but if they perceive asset management as
something the engineers do then it may be difficult to
persuade them of this.
Where asset management responsibilities are delegated
to one part of the organisation but there is no
explicit accountability for asset management in senior
management, then the asset management team may
deliver incremental benefits but struggle to drive asset
management practices across functions, departments or
into front line services or the supply chain. Often, in this
situation, a stalemate forms where asset management
is perceived as a tactical issue by senior management
because the people responsible for asset management
lack the authority to act more strategically.
5.5.4 Organisational Culture

The culture of an organisation affects everything it does
and all aspects of its performance. Asset management
is no exception to this, any more than are safety, security,
financial management, customer service or corporate
reputation. This is why a proactive approach to culture
management is important to organisations which seek to
benefit from asset management.
There is no one single correct culture for an organisation.
Culture is quite simply the way things are done and
each organisation needs to decide what type of culture
it needs to be successful and seek to establish this. If the
current culture of an organisation is short-term, closed to
outside ideas, output driven and risk averse, it will need
to do much more to benefit from asset management
thinking and practices than an organisation which plans
for the long term, values processes as well as outputs,
benchmarks itself to external best practice and practices
innovation.
The first step towards creating a culture which is
conducive to asset management is for the senior
management team to produce a clear idea of what it is
they are trying to achieve and why the approach they
are adopting is likely to be effective. Clearly, this should
support both the Asset Management Strategy &
55
Objectives and the wider aims of the organisation.

It should also take into account the constraints under
which the organisation operates.
There are a number of best practice principles that
senior managers need to apply when deciding on the
appropriate Organisation Structure & Culture for
their Asset Management activities which include:
Be clear about the purpose of the organisation.
Be consistent across the whole organisation.
Ensure everyone understands the boundaries of their
responsibilities and accountabilities.
Ensure everyone is motivated to accept their
responsibilities and accountabilities.
Ensure everyone is completely clear about the
chain of command and how, and under what
circumstances, issues are escalated.
Ensure everyone is completely clear about the
organisations channels of communication and how
information gets passed from the top to the bottom,
sideways and back up again.
Ensure communications get acted upon.
Ensure everyone knows where, when and how
decisions are made and who makes them.
Ensure visible support and engagement from senior
management for any Asset management changes or
improvement initiatives.
5.5.5 Competence Management

One of the most widely used definitions of
competence is the ability to perform activities to
the expected standard. However, competence
does not guarantee good performance. There are
several reasons for this. Competence is a condition
which tends to deteriorate if it is not practised.
Competent people will struggle to perform well in a
dysfunctional team or organisation. Some activities
occur infrequently which makes it hard to maintain the
competence of those who perform them. Attitudes,
beliefs, lifestyles and work relationships all exert
56
Issue 2 July 2014
important influences on peoples ability to perform.

A fundamental task for all organisations is to make
sure enough suitably competent people are available
to undertake the activities their success depends on.
In the case of asset management organisations, senior
management needs to understand the implications
that the Asset Management Strategy & Objectives
have for the competence of their workforce. This
means being clear about competence requirements
at all levels and ensuring these are used to select,
develop and review people and define role and
responsibilities and the relationships between them.
The IAM Competences Framework is now widely used
by companies to specify their specific competence
requirements and build competence management
systems around them.
Bringing Competence Management into a
structured approach does not need to be bureaucratic
or expensive. There is still no single formula which all
organisations should be striving to adopt. Even where
there is general agreement about the benefits of a
particular approach, such as being risk based, there
is no agreement about the best way to design and
implement it. Nowhere can this be seen more clearly
than in the variety of guidance and practice promoted
by regulatory bodies. However, it is generally agreed
in the research literature that organisations need to
adopt a strategic approach to managing competence
and behaviour and that this should cover both the
development of individual competence and the
development of organisational competence.
People come to asset management roles from a range
of different technical, operational and managerial
backgrounds, bringing with them different concepts,
perspectives, methodologies and networks. Knitting
these together to form coherent and effective asset
management teams should be a key component of
asset management strategy and planning.
5.6
Issue 2 July 2014
Risk & Review

Customers
Legislation
Commercial
Environment
Investors
Strategy & Planning
Acquire
Operate
Lifecycle
Delivery
Organisation
& People
Asset Management
Decision-Making
Dispose
Maintain
Risk &
Review
Asset Information
In any management system, Risk and Review is

a fundamental requirement for a sustainable asset
management system. In the field of Asset Management
Decision-Making, it facilitates the constant and evolving
trade-off between performance, cost and risk whilst
providing the feedback and review mechanisms to
facilitate the adaptation of objectives and evolution of
understanding of asset criticality to the delivery of the
business aims.
The organisation needs to understand its tolerance to risk in
terms of safety, environmental, financial, reputational and
performance risk in order that criticality can be appropriately

defined and decision making processes informed. The
development and ongoing management of stakeholder
engagement is key to understanding, describing and
communicating these tolerances since it is the stakeholders
who ultimately face the risks of the organisation.
Risk and Review processes are also fundamental in
preparing an organisation for significant events like
accidents, incidents or the impacts of climate change to
ensure that it has appropriate contingency planning in
place and mechanisms for assuring business continuity.
57
Having understood tolerance to risk and thus the role

the assets play in terms of criticality to business decision
making it is important to ensure that appropriate
feedback and review mechanisms are in place to
monitor the risk profile against these risk limits. A
strong understanding of asset performance and health
helps inform the appreciation and development of
criticality and risk measurement in the organisation.
The investigation and review of incidents and failures
provide feedback mechanisms to bring together the
understanding of asset performance and health in
the context of criticality and business objectives. This
structure ensures that change requests are informed and
appropriate and suitable Change Management processes
provide the necessary controls over this aspect.
Standard or General Accounting Practices provide
assurance that the thermometer of our financial
performance is correctly calibrated and audit provides
assurance that everything in the organisation is as it
should be. Together, these formal controls provide
additional feedback to inform the evolution of the
Asset Management processes across the business.
The Risk & Review Group contains the following
Asset Management Subjects:
Risk Assessment and Management

Contingency Planning & Resilience Analysis
Sustainable Development
Management Of Change
Assets Performance & Health Monitoring
Asset Management System Monitoring
Management Review, Audit & Assurance
Asset Costing & Valuation
Stakeholder Engagement
5.6.1. Risk Assessment and Management

Risk Assessment and Management is an essential
component that enables an organisation to benefit
from optimised Asset Management decision making.
58
Issue 2 July 2014
It is part of the process that enables a disciplined

approach for an organisation to maximise value and
deliver its Organisational Strategic Plan.
The purpose of having a view of asset criticality is
to inform the organisations Asset Management
Strategy and decision making tools and processes.
Assessing asset criticality requires the organisation
to anticipate the consequences or impact of the
failure of an asset, how the organisation assesses
consequence or impact of asset failure depends on the
organisations vision, mission, values, business policies,
stakeholder requirements, goals and risk management
criteria. These are all important considerations as an
Asset can only be critical to delivering an objective or
goal, and the risk of its failure can only be quantified
through the potential impact of that failure on the
organisations goals. Assets have no inherent criticality
and there is no risk without consequence.
Once the consequences or impact of asset failure has
been recorded by an organisation it has to be put in
a useful format that would enable an assessment of
the information to take place. The risk assessment
criteria used by an organisation will typically reflect
the key issues that the organisation is managing i.e.
it may be cost based or another metric important to
the organisation. However the purpose of the risk
assessment is to enable the organisation to optimise
their Asset Management decision making by providing
a consistent methodology for assessment and
management of uncertainty.
Risk Assessment and Management is part of a
disciplined management framework and governance
process. Often organisations develop risk registers or
logs and processes to support the opening, updating
and closure of business risks. The management
of risks typically includes the risk management
policy, framework and processes that define how
the assessment and decisions on risk controls and
mitigations take place at the appropriate level within
an organisation. Organisations should consider
Issue 2 July 2014
how the description of the asset-related and asset

management-related risks can be combined with the
specific transparency requirement provided by internal
control and risk management and/or the corporate
governance framework.
Weather & Climate Change poses a particular risk
for asset owners and operators in all sectors. Specialist
knowledge and robust processes and procedures are
required to make sure actual and potential impacts are
well understood and can be controlled or mitigated,
taking into account the impacts that assets themselves
on the environment.
Whereas weather can be defined as the conditions
experienced in the short term, climate is the weather
averaged over a long period of time. Both have the
potential to seriously affect the availability and/or
reliability of assets and the goods and services that
depend on them. In the immediate term, operations can
be degraded by a range of common weather events,
such as heavy rain leading to the flooding of electricity
sub-stations; snow and frost preventing construction
works; high winds bringing down overhead power
lines and high temperatures causing rails to buckle.
Events like these not only impact adversely on
service provision but also make planned and reactive
maintenance activities difficult to carry out effectively.
Asset Management strategies and plans need to factor
in these risks to continuity and performance and the
costs of adapting procedures, information systems and
infrastructures to lessen their effects.
Further to considering what the impact of future

Climate Change is on the assets, organisations
must consider what the impacts of the assets are on
the environment. There is a careful balance to be
struck between investment in future asset resilience
and preventing future Climate Change. Preventing
flooding through the construction of physical defences
might increase resilience but its high carbon footprint
would further add to the problem.
Once actual and potential impacts have been
identified and calculated, structured processes can
be put in place to manage the associated risk. While
it is not possible to create an asset base which is
completely resilient to any kind of threat, being
able to demonstrate a proportionate response to
the kinds of risk posed by Weather & Climate
Change is considered good practice. For example,
there are many instances where major technical or
infrastructural changes have turned out to be less
effective and many times more expensive than better
organisational use of more carefully specified weather
forecast data.
The implications of Weather & Climate Change
should be taken into account during the development
of Asset Management Policy and Asset
Management Strategy. Organisations which do
this are more likely to manage the associated risks
and uncertainties and ensure resilience and continuity
in the face of long-term climate change as well as
helping address the root cause of a changing climate.
Longer term Climate Change poses challenges

of a different order. These range from increased
frequency of occurrence of severe weather events to
the emergence of new weather events not currently
experienced or planned for. Asset Management
organisations need to ask themselves whether current
ISO 31000, Risk Management Principles and

Guidance, provides further guidance on good practice
approaches to Risk Assessment and Management.
assets and those being installed are capable of coping

with the predicted future climate and what implications
these predictions have for current Asset Management
planning assumptions and delivery practices.
The resilience of any organisation or its assets is

essential to its operation. In the Pitt Review, 2008,
Resilience was described as The ability of a system or
organisation to withstand and recover from adversity.
5.6.2. Contingency Planning & Resilience

Analysis
59
BC
Once an understanding is attained and a detailed

risk assessment process is completed, then
Contingency Planning can be introduced to deal
with a majority of the threats faced. A consistent
methodology needs to be adopted to ensure that all
threats and vulnerabilities are effectively captured,
effectively risk assessed, responses, other mitigations
and Contingency Plans developed, tested and
exercised and a review process introduced. A cyclical
process that captures this methodology is detailed
within British Standard, BS25999; Business Continuity
Management - Code of Practice as shown in the
diagram below.
he organ
in t
is
at
io
lt
be
s
cu
Understanding
the organisation
In the case of a transportation network, the ability

to enable free passage to the ultimate customer, the
user, is the resilience requirement. As such, this is not
just about clearing up after an incident but providing
continuity of business as well. To become resilient to
unplanned and unexpected events, it is essential that a
full awareness of the critical points of an organisation
and its assets is captured. An understanding of the
minimum requirements to ensure the organisation or
asset can operate is developed and an assessment of all
potential threats that could be faced completed, be they
natural occurrences (flooding, wind and longer term
climate change), accidental or deliberate events.
Issue 2 July 2014
Em
ur
Determining
BCM
strategy
Developing and
implementing
BCM responses
BC
he orga
in t
nis
a
l
cu
r
tu
Em
BCM
programme
management
ed
Exercising,
maintaining
and reviewing
ti
on
Figure 15. Business Continuity Management
60
Issue 2 July 2014
This process required the following steps to be

undertaken:
and Organisational Culture to ensure that resilience

is robust and up-to-date.
Step 1 is to understand the organisation by completing

a threat and vulnerability study (sometimes referred to
as a Business Impact Analysis), looking at the entirety
of the asset against all potential threats faced. This will
need to be linked to the relevant Risk Assessment &
Management processes to identify the key areas of
vulnerability which need to be addressed.
Step 2 is to determine the strategy to be adopted,
looking at the risk assessment process and deciding
processes to follow.
5.6.3. Sustainable Development
Step 3 is to develop and implement the response,

introducing identified mitigations where required
and developing and implementing detailed
Contingency Plans.
Step 4 will be to regularly Test / Exercise, Maintain
and Review the mitigations and plans and ensure
that the responses are still fit for purpose and feed
outcomes in the continual review process.
Asset Management has an important impact on

long-term sustainability as a result of its effect in the
following areas:
The description of the contingency procedures

established for identifying and responding to incidents
and emergencies should include:
a The kind of procedure the organisation has put
in place to identify, prevent and respond to
contingency risk;
b Information related to the contingency provision,
with a comparison to the provision of last year
and the reasons for any decrease or increase in the
provision;
c Identification of the main contingency situations
that arose during the financial year with the possible
financial or operational impact on the assets;
The description can be combined with the risk
management disclosure requirement as specific
contingency risks.
All of these aspects will need to be embedded within
the Asset Management Organisational Structure
Sustainable Development highlights the need

for consideration to be given to apply long-term
perspectives to current Asset Management activities
and their impacts. Underpinning the requirement for
Sustainable Development is recognition of the need
to safeguard the interests of future generations over
the long-term while promoting short-term economic
and environmental stability.
The effective management of a nations.

infrastructure and manufacturing base.
The impact on the environment.
Being a key enabler for many societal structures.
Whole life consideration of risks, costs and
performance of assets
Sustainable Development involves considering
the environmental, social and economic aspects of
activities (sometimes referred to as the triple bottom
line approach). Rather than trading off one factor
against another, all three factors should be optimised
in the decision making process. Hence a Sustainable
Development review within an organisation has to
be supported by the broader Asset Management
Strategy and the Risk Assessment & Management
framework. However, these Asset Management
related elements can only be influenced and managed
with clear direction on an approach to Sustainable
Development from the top management of the
organisation.
Having a holistic Asset Management Strategy
requires the incorporation of Sustainable
Development review and the methodology
surrounding the review can be adopted to meet the
61
Asset Management Policy and Asset Management

Strategy of the organisation. Further guidance
concerning the implementation of a Sustainable
Development approach can be found in BS 8900,
Guidance for Managing Sustainable Development.
Issue 2 July 2014
Change Management Planning is a growing subject that

often involves the whole organisation. Changes to the
operational circumstances or the risks associated with
the assets should form a key input to the organisations
change management processes as well as Configuration
Management Processes discussed earlier.
5.6.4. Management of Change

There is a wide range of changes that an Asset
Manager needs to consider, for example new
technology, new approaches, ageing assets, the
workforce retiring or becoming more skilled, new
legislation, new knowledge and data collection
processes. Some of these are obvious, but the Asset
Manager must also consider how these impact on
changes in organisational objectives or tolerance to
risk. Some of these changes are predictable but others
are not and an appropriate approach to Management
of Change needs to reflect this.
The challenge for the Asset Manager is to define what
constitutes a change that can impact their particular
assets, in their particular industry and subsequently
manage all of these changes in such a way as to
optimise the risks to the Life Cycle operation of the
asset. Risk Assessment & Management are key
to narrowing down what is important and what is
not, however, the Asset Manager should be wary
of changes that can change criticality; potentially
downgrading the criticality of an asset or system or
making a previously unimportant asset very critical to
the operation.
5.6.5. Assets Performance & Health Monitoring

Assets Performance & Health Monitoring is
necessary for good Asset Management. A robust
measurement framework includes measures that relate
to the performance and health of the physical assets
and asset systems.
It is fundamental that performance measures
and targets align to the business, vision, goals
and stakeholder requirements as defined in an
organisations strategic plan and Asset Management
Strategy & Objectives. Appropriate performance
measures provide feedback and understanding of the
physical assets and form an essential part of risk and
business management through this feedback into the
Asset Management Decision-Making processes.
The mechanism for setting required levels of service is
defined in the Asset Management Policy and Asset
Management Strategy & Objectives, which define
the measures of the desired functional performance,
level of service and condition of assets.
Having identified that change is required, or being

implemented, it is important not to over-react.
Appropriate management of change activities should
not only utilise previous risk assessments to identify
critical change, but should also use risk assessment
and analysis to appropriately assess the proposed
new-solution to provide assurance that the new
It is normal for Asset systems - groups of assets that

operate together to provide some function - for
example an electrical circuit, a rail track, a process
plant or a pipeline, whole plants, assembly lines or
networks have required performance criteria. Good
Asset Management requires a level of monitoring both
at the asset system level and at the asset level in order
to understand and manage performance and to be
able to support decisions at strategic and tactical level.
asset, technology, process or people do not introduce

new and previously unconsidered risks that could be
worse than the previous situation.
Lagging performance measures that monitor the past

performance of assets and asset systems, and leading
62
Issue 2 July 2014
measures that predict the future performance of asset

systems are normally combined to give a view of how
the process is performing and what outcomes are
being achieved. PAS 55 requires the consideration
of proactive, reactive, leading, lagging, qualitative
and quantitative measures and also provides a useful
description of them; meanwhile, ISO 55001 specifies
a range of performance evaluation requirements

in line with other management standards. Internal
efficiency measures monitor the efficiency of processes
and output measures provide a measure the actual
delivery of the business such as system reliability and
delivered product. These principles are shown in the
diagram below
Asset Management
System
LEADING
Performance Indicator
LAGGING
Performance Indicator
E.g.
Process
Maturity
Assets
E.g.
Asset
Condition
Past or Existing
Non-Conformities
E.g.
Asset Failures
or Incidents
Reactive
Monitoring
Continuous
Improvement
Pro-Active
Monitoring
Management
Review
Figure 16. Performance Measurement
Increasingly the term asset health is being used in relation

to measures that monitor the current (or predicted)
capability or condition of an asset to perform its desired
function. This is a complex idea and can involve
composite measures which combine various modes
of failure. It is most frequently used as a measure for
supporting Capital Investment Decision-Making.
5.6.6. Asset Management System Monitoring

As well as monitoring the performance of assets and
their associated systems, it is necessary to measure the
performance of the Asset Management System itself,
i.e. the effectiveness and efficiency of the processes

and activities that the organisation has in place for
Asset Management. This is most clearly embodied in
ISO 55001, where the requirement to adopt a PlanDo-Check-Act approach to all aspects of the Asset
Management System is a specific requirement.
A range of performance measures need to exist at
various levels of granularity to give insight on the
performance of the Asset Management System. At
the highest level a management dashboard presents
summary information to senior managers, with
63
increasing levels of detail provided through the

organisation appropriate to the decisions and issues
that are being managed. Good practice requires clear
accountabilities for both the reporting of measures
and acting on them, including managing individual
performance. Most Asset Management organisations
include asset performance measures in personal targets.
Performance measures and their management are an
integral part of business processes and the documented
Asset Management System. It is inevitable that this
generates information system requirements, and
performance measurement is closely linked to the wider
issue of data and information management. Good
practice requires the ongoing monitoring and trending
of performance measures, to enable control and
prediction.
Asset Management System Monitoring takes account
of all available feedback mechanisms (performance,
asset health, incident investigations, and audit reports)
and compares them with expected performance so that
changes in the objectives, risk control measures and more
in general the Asset Management System can be made to
fine tune the direction of the organisation.
5.6.7. Management Review, Audit & Assurance

Management Review, Audit & Assurance is part of the
collection of processes that help to close the loop in the
Plan Do Check Act cycle of management system design.
Audit is one of the processes (along with system
performance monitoring, Asset health monitoring and
incident investigation) that provide an organisation
with assurance that everything is occurring as
intended. It is the process that an organisation uses to
check that processes are being followed and standards
or specifications adhered to. It provides assurance
that processes (which are designed to manage risk)
are both in place, and being effectively used. Audit is
part of the Check element of the Plan Do Check Act
Cycle.
64
Issue 2 July 2014
Audit is typically undertaken within several parts

of an organisation. Most organisations have an
internal audit team that would normally report into
an independent audit committee. This internal audit
team will examine a range of issues, some of which
would be asset management related. Organisations
would normally also have technical audit teams and
HSEQ audit teams that are evaluating the level of
compliance with technical standards, legislation and
regulatory requirements where relevant.
Additional assurance activities would include the
monitoring of asset management work undertaken
by supervisors and managers and the potential use of
external expertise for high criticality activities.
Management Review is the activity where an
organisation takes stock of its Asset Management
activities and reviews the:
performance of assets against the Asset
Management Strategy & Objectives;
performance of people against their personal
objectives;
feedback from customers;
effectiveness of processes; and
the risk profile and whether it remains appropriate
for the organisations risk appetite.
5.6.8. Asset Costing & Valuation

Asset Costing & Valuation is concerned with how
an organisation manages the financial information
relating to its assets and asset management activities.
This includes ensuring that the quality of financial
information is appropriate for the applicable financial
reporting framework for the organisation.
Additional to the information laid down in local
Generally Accepted Accounting Principles (GAAP)
and IFRS, relevant information regarding the financial,
technical and operational information relating to the
activities undertaken on assets should be made available
Issue 2 July 2014
to the relevant stakeholders. This is of particular

importance in the case of asset-intensive companies,
where assets constitute a substantial portion of the total
balance sheet value and annual expenditure.
Additional information in the annual report on
financial, technical and operational aspects of
physical assets will increase the comprehensibility,
relevance, reliability and comparability of the financial
statements. Organisations will need to consider
whether the transparency requirements of an Asset
Management standard (ISO 55001) can be combined
with the transparency requirements from other sources
such as the applicable financial reporting framework
(e.g. local GAAP, IFRS, US GAAP), legal and regulatory
requirements, international applicable framework on
internal control, risk management and/or corporate
governance requirements.
Each organisation is typically governed by a set
of accounting codes and practices according to
the jurisdiction in which they operate. Like many
standards, accounting codes are harmonising across
countries and irrespective of the codes applied, there
are common elements from an Asset Management
perspective outlined as follows:
Asset Valuations - the method of valuation used
by the organisation, its appropriateness and
the accuracy with which the valuations have
been developed including schedules & rates. It
also includes the methods used to update this
information and the alignment of Asset Valuations
with the financial balance sheet of the organisation.
Depreciation - the method used to establish the
residual or effective lives of the individual assets and
if necessary their components and the accuracy of
the depreciation calculations.
Operational Costs - the method used by the
organisation to assess the cost of operations of
individual facilities and assets and the breakdown of
these operational costs in terms of labour, energy,
chemicals and plant & equipment.
Maintenance Costs - the method used by the

organisation to assess maintenance costs (planned,
predictive and unplanned) including the breakdown of
these costs into labour, materials, plant and equipment.
Renewal Costs - the method used by the
organisation to assess renewal costs in terms of the
unit costs of individual renewal activities including
the breakdown of these costs into labour, materials,
plant and equipment
Renewal Liabilities - the processes used to identify
future capital expenditure renewal liabilities,
including any backlog in maintenance.
Social, Environmental, Safety and Reputational Costs
the method used by the organisation to quantify
social, environmental, safety and reputational costs
in monetary terms.
Organisations that are demonstrating good practice in
Asset Costing & Valuation would typically be able to
demonstrate the following:
The ability to recognise and adopt appropriate
valuation practices that may be driven by local
regulatory or legislative regimes.
The ability to value assets at all levels of the
hierarchical asset register structure & update this
valuation cost effectively in both value, unit rates
and effective residual lives;
The ability to understand the operational costs of
individual assets and/facilities in terms of the above
break up, together with special costs for smaller
plant or equipment that may consume high power
costs.
The ability to identify the maintenance and renewal
costs from the Asset Management information
system or elsewhere for all levels of the hierarchy
down to the chosen item;
The ability of the organisation to identify its future
renewal program, and the associated residual
business risk exposure/s;
The ability to include social, environmental,
safety and reputational costs and risks in Asset
65
5.6.9. Stakeholder Engagement

Stakeholder Engagement is an increasingly
formalised area of business, particularly for regulated
utilities where regulators are setting expectations
on consultation with stakeholder groups. This
element relates to the methods used to engage with
stakeholders to articulate different scenarios within
an organisations Asset Management Plan(s). The
management of Stakeholder Engagement requires
an understanding of the costs and outputs associated
with each scenario in order to reflect stakeholder
priorities and to select scenarios that most closely meet
their aspirations.
It is critical to identify the stakeholders that have an
interest in an organisations physical assets. Typically
these will include:
Vendors / Suppliers of equipment and of spare parts

Regulators
Governments
Board of Directors
Owners
Unions
Influencers
The Community and neighbours
Customers, both strategic and non-strategic
Each stakeholder type has an impact on how an

organisation performs. Introducing defective spare
66
Issue 2 July 2014
parts, withholding a license to operate, shutting down

an operation due to a strike notice, imposing penalties
for non-conformance to regulations, and reducing the
operating budget resulting in deferred maintenance
are but a few of the negative consequences external
stakeholders can impose on an asset-centric organisation.
Each external Stakeholders Relationship reflects their
interactions with the organisation. These interactions are
measurable and can be used to monitor performance.
The health of these stakeholder relations determines how
well these stakeholders interact with an organisation and
how well they support the Asset Management Strategy
& Objectives. External Stakeholder Engagement
supports an organisations ability to manage assets
effectively, efficiently, and reliably.
Although many of these stakeholders are outside
the direct control of an organisation, Stakeholder
Engagement can be influenced by changing what
an organisation does internally to align the outcomes
of these interactions with the organisations strategic
objectives. Organisations can change business
processes, introduce and enforce policies and
procedures, develop incentives to drive employee
behaviour to align with a vision of how that
organisation wants external stakeholders to perceive it.
Measuring the delivery of this vision provides visibility
and a drive to do business differently redefining how
the organisation relates to its external stakeholders.
Issue 2 July 2014
6. Definitions
Asset
Asset management information
Item, thing or entity that has potential or actual value

to an organisation.
Meaningful data relating to assets and asset

management.
Notes:
Note: Examples of asset management information

include asset registers, drawings, contracts, licences,
legal, regulatory and statutory documents, policies,
standards, guidance notes, technical instructions,
procedures, operating criteria, asset performance and
condition data, or all asset management records.
1 Value can be tangible or intangible, financial or

non-financial, and includes consideration of risks
and liabilities. It can be positive or negative at
different stages of the asset life.
2 Physical assets usually refer to equipment, inventory
and properties owned by the organization. Physical
assets are the opposite of intangible assets, which
are non-physical assets such as leases, brands,
digital assets, use rights, licences, intellectual
property rights, reputation or agreements.
3 A grouping of assets referred to as an asset system
could also be considered as an asset.
[SOURCE: ISO 55000:2014]
Asset life
The period from asset creation to asset end of life.
[SOURCE: ISO 55000:2014]
Asset management
Coordinated activity of an organisation to realise value
from assets.
Notes:
1 Realisation of value will normally involve a
balancing of costs, risks, opportunities and
performance benefits.
2 Activity can also refer to the application of the
elements of the asset management system.
3 The term activity has a broad meaning and can
include, for example, the approach, the planning,
the plans and their implementation.
[SOURCE: ISO 55000:2014]
Objective
Result to be achieved.
Notes:
1 An objective can be strategic, tactical or
operational.
2 Objectives can relate to different disciplines (such as
financial, health and safety, and environmental goals)
and can apply at different levels (such as strategic,
organisation-wide, project, product and process).
3 An objective can be expressed in other ways, e.g.
as an intended outcome, a purpose, an operational
criterion, an asset management objective or by the
use of other words with similar meaning (e.g. aim,
goal, or target).
4 In the context of asset management systems, asset
management objectives are set by the organization,
consistent with the organisational objectives and
asset management policy, to achieve specific
measurable results.
[SOURCE: ISO 55000:2014]
Asset management plan

Documented information that specifies the activities,
resources and timescales required for an individual
asset, or a grouping of assets, to achieve the
organisations asset management objectives.
67
Notes:
1. The grouping of assets may be by asset type, asset class,
asset system or asset portfolio.
2. An asset management plan is derived from the strategic
asset management plan.
3. An asset management plan may be contained in, or may
be a subsidiary plan of, the strategic asset management
plan.
[SOURCE: ISO 55000:2014]
Asset management policy

Principles and mandated requirements derived from, and
consistent with, the organisational strategic plan, providing
a framework for the development and implementation of
the asset management strategy and the setting of the asset
management objectives.
Asset Management Strategy /Strategic asset management
plan (SAMP)
Issue 2 July 2014
Asset portfolio
Assets that are within the scope of the asset
management system.
Notes:
1.A portfolio is typically established and assigned for
managerial control purposes. Portfolios for physical
hardware might be defined by category (e.g. plant,
equipment, tools, land). Software portfolios might be
defined by software publisher, or by platform (e.g.
PC, server, mainframe).
2.An asset management system can encompass
multiple asset portfolios. Where multiple asset
portfolios and asset management systems are
employed, asset management activities should be
coordinated between the portfolios and systems.
[SOURCE: ISO 55000:2014]
Asset system
Set of assets that interact or are interrelated.
Documented information that specifies how organisational

objectives are to be converted into asset management
objectives, the approach for developing asset management
plans, and the role of the asset management system
in supporting achievement of the asset management
objectives.
[SOURCE: ISO 55000:2014]
Enablers (asset management)

Supportive systems, procedures, processes, activities
and resources that enable an organisation to operate
its asset management system efficiently and effectively.
Notes:
Functional policy
1. A strategic asset management plan is derived from the
organisational plan.
2. A strategic asset management plan may be contained in,
or may be a subsidiary plan of, the organisational plan.
[SOURCE: ISO 55000:2014]
Asset management system

Management system for asset management whose
function is to establish the asset management policy and
asset management objectives.
Note: The asset management system is a subset of asset
management.
[SOURCE: ISO 55000:2014]
68
Specified approach, rules and boundaries set out by an

organisation that provide direction and the framework
for the control of specific asset-related processes and
activities.
Note: Functional policies, strategies and objectives
relate to asset management activities or processes,
such as capital investment, construction methods,
maintenance and purchasing, These should not be
confused with asset management policies, asset
management strategy and asset management
objectives, which are cross-functional, considering the
Life Cycle optimisation of all relevant activities.
Issue 2 July 2014
GAAP
Life Cycle
Generally Accepted Accounting Principles. A widely

accepted set of rules, conventions, standards, and
procedures for reporting financial information, as
established by the Financial Accounting Standards Board
(FASB).
Stages involved in the management of an asset.

Note: The naming and number of the stages and the
activities under each stage usually vary in different
industry sectors and are determined by the organisation.
[SOURCE: ISO 55000:2014]
IFRS
International Financial Reporting Standards. Guidelines
and rules set by the International Accounting Standards
Board (IASB) that companies and organisations can
follow when compiling financial statements. The
creation of international standards allows investors,
organisations and governments to compare the IFRSsupported financial statements with greater ease.
Optimise
Achieve by a quantitative or qualitative method, as
appropriate, the best value compromise between
conflicting factors such as performance, costs and
retained risk within any non-negotiable constraints.
69
Organisation
Person or group of people that has its own functions
with responsibilities, authorities and relationships to
achieve its objectives.
Note: The concept of organisation includes, but is not
limited to, sole-trader, company, corporation, firm,
enterprise, authority, partnership, charity or institution,
or part or combination thereof, whether incorporated or
not, public or private.
[SOURCE: ISO 55000:2014]
Issue 2 July 2014
3.Risk is often characterized by reference to

potential events (as defined in ISO Guide 73:2009,
3.5.1.3) and consequences (as defined in ISO
Guide 73:2009, 3.6.1.3), or a combination of these.
4.Risk is often expressed in terms of a combination of
the consequences of an event (including changes in
circumstances) and the associated likelihood (ISO
Guide 73:2009, 3.6.1.1) of occurrence.
5.Uncertainty is the state, even partial, of deficiency of
information related to, understanding or knowledge
of, an event, its consequence, or likelihood.
[SOURCE: ISO Guide 73:2009, 1.1]
Organisational strategic plan

Overall long-term plan for the organisation that is
derived from, and embodies, its vision, mission, values,
business policies, stakeholder requirements, objectives
and the management of its risks
Risk
Effect of uncertainty on objectives.
Notes:
1.An effect is a deviation from the expected positive
and/or negative.
2.Objectives can relate to different disciplines (such as
financial, health and safety, and environmental goals)
and can apply at different levels (such as strategic,
organisation-wide, project, product and process).
70
Property, Plant and Equipment

According to International Accounting Standard 16
(IAS16), Property, Plant and Equipment comprise
tangible assets held by an entity for use in the
production or supply of goods or services, for rental to
others, of for administrative purposes that are expected
to be used for more than one period. Depending on
the applicable financial reporting framework, another
definition of Property, Plant and Equipment might be
appropriate.
Sustainable
Achieving or retaining an optimum compromise
between performance, costs and risks over the Life
Cycle, whilst avoiding adverse long-term impacts to the
organisation from short-term decisions.
This document has been approved for publication by Richard Edwards, Chair of IAM Faculty.
The IAMs Faculty is a Standing Committee of the IAM, which directs and prioritises the technical
work of the Institute.
It is responsible for ensuring that the IAMs view of the discipline of Asset Management and all
the standards, guidance, knowledge and other outputs produced by the Institute are developed
within a common and evolving framework and are aligned with the aims of the Institute.
The IAM acknowledges gratefully the following IAM Members for their valuable contribution to the preparation and
updating of this document:
Darren Anderson, Ferrovial

Paul Barnfather, EA Technology Ltd
Roger Byrne, Semi-Retired Asset Management Mentor
Dave Champness, United Utilities Water Plc
Rudy Crous, Competence Assurance Solutions Ltd
John Darbyshire, London Underground Ltd
Rhys Davies, Smart Asset Management Solutions Ltd
Derrick Dunkley, National Grid Plc
Richard Edwards, AMCL
David Gazda, EA Technology Ltd
Kirk Gillett, Wipro Technologies
Andrew Harrison, EA Technology Ltd
Peter Jay, The Woodhouse Partnership Ltd
Dr Charles Johnson, Competence Assurance Solutions
Ltd
Mike Jones, IAM
Chris Lloyd, Competence Assurance Solutions Ltd
Ian McLellan, Atkins Plc
Donald Miller, Scottish Power

Dr Christian Roberts, GHD
Danil Pairon, KPMG
Richard Schouten, Accenture
Andrew Sharp, Asset Management Consulting Ltd
Navil Shetty, Atkins Plc
Tom Smith, University of Wisconsin
Julie Spinks, J D Spinks Ltd
Graham Stroud, Atkins Plc
Julian Schwarzenbach, Data and Process Advantage Ltd
Sue Thomas
Alex Thomson, The Woodhouse Partnership Ltd
Sarah Vine, Atkins Plc
Andy Walton, Atkins Plc
Andy Watts, EC Harris
Marie-Pierre Whaley, Northumbrian Water Ltd
Aled Williams, National Grid plc
John Woodhouse, The Woodhouse Partnership Ltd
71
Issue 2 July 2014
Notes
72
73
Download your copy FREE!

www.theIAM.org/AMA
The Institute of Asset Management

St Brandons House
29 Great George Street
BRISTOL
BS1 5QT
United Kingdom
Design and production by Redhouse Lane Communications
www.theIAM.org

Asset Management - An Anatomy (2nd Ed.)

Uploaded by

Copyright:

Available Formats

Asset Management - An Anatomy (2nd Ed.)

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Asset Management - An Anatomy (2nd Ed.)

Uploaded by

Copyright:

Available Formats

Asset Management an anatomy

Copyright The Institute of Asset Management 2014. All rights reserved

An Anatomy of Asset Management

Issue 2 July 2014