ISO 55000 Will Up the Ante for Asset Performance Management

Companies should prepare for the trickle-down effect expected from regulatory bodies and insurance providers as a result of a formal international standard for managing assets.

Paula Hollywood, senior analyst, ARC Advisory Group
Paula Hollywood, senior analyst, ARC Advisory Group

 

Unless you’ve been living under a rock for the past few years, chances are good that you have heard about the upcoming ISO 55000 Asset Management Systems standard. According to the ISO website, the final standard should be published early this year (if it has not already been published by the time this column appears in print). How will this impact manufacturers and other industrial organizations? Though ARC Advisory Group does not anticipate immediate impact, we do encourage companies to prepare for the trickle-down effect expected from regulatory bodies and insurance providers as a result of a formal international standard for managing assets.

A quick review of the origins

Originally developed by the Institute of Asset Management (IAM), a UK-based asset management association, and published by the British Standards Institution (BSI), Publicly Available Standard (PAS) 55 was launched in 2004 as a general standard for managing physical assets. The initial targeted industries were those serving the public, primarily regulated infrastructure and public utilities. The structure of the standard is analogous to Deming’s Plan-Do-Check-Act (PDCA) continuous improvement cycle used in quality management systems.

PAS 55 certification requires an enterprise to optimally manage capital investments, daily operations, maintenance, resources, risks, performance and sustainability for all its assets. In August 2009, BSI filed a proposal with ISO to develop a global asset management standard for physical assets based on PAS 55. Fast forward to the present and—thanks to a tremendous effort by all involved parties—the international standard for management of physical assets, ISO 55000, is about to become official. This represents a significantly compressed time schedule for this type of initiative.

New impetus for certification

The lack of an asset management standard has left enterprises to their own devices to determine best practices. Formal industry standards provide a framework for both economies of design and improved product and service quality. Standards facilitate interoperability, production improvements, and scalability of asset management programs among different industries and between plants. Standards can also help improve quality of life by contributing to safety, human health and environmental protection. Unless mandated by regulatory bodies, standards compliance is voluntary; however, it demonstrates an organization’s commitment to quality, performance or safety.

In addition to helping to mitigate the legal, social and environmental risks associated with avoidable plant accidents, the basic need to obtain insurance coverage is emerging as another reason to look more carefully at strategic asset management. Insurance is one of those necessary evils that most people think about only when paying the premiums or filing a claim. But it is typically impossible to obtain a home mortgage, drive a vehicle, or operate a plant, refinery or other industrial operation without it. A company’s ability to demonstrate risk reissues, plant reliability, mitigation of loss and avoidance of unplanned outages has always impacted insurance costs. Without a formal standard as a guide, assessments are more arbitrary; a formal standard will change the game. ARC believes that within the foreseeable future, insurance companies will require ISO 55000 certification as a condition of providing insurance.

Make asset management strategic

A strategic approach to asset management should leverage the power embedded in various operations and maintenance applications to improve asset availability and utilization. No other departments in the organization have the potential to impact the bottom line as much as operations and maintenance. Enterprises need to focus on relevant asset management issues from a business performance and financial perspective.

ARC senses a palpable shift in the practice of physical asset management as industrial organizations move from the early-adopter phase to the early-majority phase of the technology adoption curve. The early adopters have proven that is possible to minimize unscheduled shutdowns, improve process and personnel safety, and protect the environment by managing capital asset health. These trailblazers are applying the information from asset management applications and the lessons learned to more cost-driven issues such as spares optimization. Determining the appropriate balance between the number of spares held in stock and sufficient quantity on hand based on asset criticality can significantly reduce inventory costs and provide a financial rationalization for stock levels.

If they have not done so already, asset and/or risk managers should become familiar with the ISO 55000 asset management standard. An overview of the principles and technologies is available on the ISO website. Risk managers should consult with their insurance provider(s) to gain an understanding of what will be expected in terms of asset management actions and documentation going forward.

Paying lip service to asset management is not enough. Industrial organizations must pass the insurance “acid test,” with documentation of the results achieved and gains realized as a result of asset and risk management programs. 

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