Global Trends in Asset Management

Scott Morris, Associate Director Global Engineering

March 6, 2013

Melanie Multiple Sclerosis UK

www.genzyme.com |
Global Trends in Asset
Management
Agenda
 What is asset management
 What is PAS 55
 Genesis
 What are the financial and investor trends
 What are the risk and insurance trends
 What are the legislation and litigation trends
 What is ISO 55000
What is an Asset?
 An “asset is defined as something that has
potential value to an organization”
 Value realization occurs when the asset fulfills its
function
 Asset Management – not a new idea
 We own assets for a reason
 They will cease to fulfill their function at some point
 Some organizations are very good at addressing
this fact
 Others, not so much
What is Asset Management?
 Definition - Any system whereby things that are of
value to an entity or group are monitored and
maintained. It may apply to both tangible assets and
to intangible concepts such as intellectual property
and goodwill
What is Asset Management?
Think of the impact on:
Total cost of unavailability

Capital investment planning

Safety

Environmental

Reputation
Who is responsible for
Asset Management?
 Depends on who you ask
 Investment
 Accounting
 Operations
 Engineering/Maintenance
 IT
 Who is right?
The Seven Questions of
Asset Management
1. What do we own and where are they?
2. What are they worth?
 Asset are more than just sunk depreciating costs
 Assets can be competitive differentiators
3. What condition are they in?
4. What do I need to do to them?
5. When do I need to do it?
6. How much money will I need to invest?
7. How do we achieve sustainability?
The Seven Questions of
Asset
•
Management
The answers to these questions lead to choices and
decisions
• Are all groups aligned?
• Do the people making these decisions have the right
information?
• What are the consequences?
• PAS 55 was the first document to address these issues
PAS 55
 Developed by the Institute for Asset
Management in UK
 Made a Publically available specification (PAS)
by British Standard Institute
 Introduces to asset management concepts of
 Line of site between organizational objectives
 Risk to Asset Management Planning
 Plan – Do – Check – Act (PDCA)
 Focused on Physical Assets
 Has become defacto regulatory standard in
some industries
PAS 55 - Line of Sight
PAS 55 - Line of Sight

Top Management
Decision Making Process
Floor
Ceiling

Asset Life

11 © Copyright Meridium 2012

PAS 55 - Line of Sight

A partial line of sight destroys business

value
Characteristics of Highly
Competitive

Companies
Market Share Matters
-
Operational
 Excellence
Focus on Core Business :

 Continuous Improvement
 Innovate or Evaporate
 Growth is Essential
 No substitute for Quality
 Value-added Only
 Data-driven Decisions
 Competitive Cost
Characteristics of Highly
Competitive Companies -
Operational Excellence
 The main objective of Operational Excellence is to reduce
operation cost and wastes, without affecting quality, time
delivery and cost of products and services one has to offer.

 "Toyota has turned operational excellence into a strategic

weapon. This operational excellence is based in part on
tools and quality improvement methods made famous by
Toyota in the manufacturing world, such as just-in-time,
kaizen, one-piece flow, jidoka, and heijunka." [1]
Operational Excellence
Global Trends in Asset
Management – Finance and
Investment
 If you could save your business millions of dollars would you do it?
 Brand and reputation are increasingly important
 Removing as much uncertainty about the future as possible
 Building stakeholder confidence
 Demonstrate long-term focus and commitment
 Organizations are being driven to do more with what they have

However…
 Investors are more risk averse
 There is a growing focus on operational risk
Global Trends in Asset
Management – Finance and
Investment
Equipment failures cost the US Refining Industry over $4 Billion per year”

John Aller, Consultant

Asset Optimization LLC

“Operational reliability problems and increased unscheduled downtime –

that led to a dull first quarter in which the company lost $1.01 per share –
have overshadowed its gains from successful restructuring initiatives over
the last two years.”
Zach’s Investment Reseach
“Bearish on Sunoco’s Future

“…significant planned and unplanned downtime in both Suncor’s

Global Trends in Asset
Management – Finance
and Investment
Global Trends in Asset
Management –Finance
and Investment
Global Trends in Asset
Management –Finance
and Investment
Global Trends in Asset
Management – Risk and
Insurance
“Demonstrating to an insurer that you are pro-active in maintaining your
equipment assets isn't the struggle - proving that what you're doing is
actually reducing the risk of breakdowns and business interruptions is
much more difficult.”
Loa Jansen, Manager of Asset Management
Xcel Energy

“Whether you realize it or not, the insurance industry when they charge a
dollar of insurance to your company, part of that pricing of that dollar is
actually based on how well they believe you manage assets and risk”
Don Schubert, SVP Marsh
Meridium Conference 2010
Global Trends in Asset
Management – Litigation
and Legislation
 A class action lawsuit was initiated … that would centre on alleged
negligence by SP AusNet in its management of electricity
infrastructure. The action alleges the power company failed to fit a $10
protective device on the power line, which contributed to it breaking
and starting the devastating Kilmore East/Kinglake fire

 In Maryland, Pepco has neglected grid maintenance and tree trimming,

staff at the Maryland Public Service Commission said this month as
part of the state's investigation into Pepco's reliability.
Global Trends in Asset
Management – Litigation
and Legislation
 We Can’t Wait: Obama Administration Takes Action to Reduce
Prescription Drug Shortages… Issues Executive Order, Backs
Legislation to Require Drug Companies to Report Shortages
 FDA takes great efforts, within its legal authority…(and) also works with
other firms who manufacturer the same drug, asking them to increase
production, if possible, in order to prevent or reduce the impact of a
shortage
 A number of people from the Pittsburgh, Pennsylvania area have filed
a lawsuit against Genzyme Corp. over allegations that it extended a
shortage of a life-saving medication…limiting its availability and
causing some patients to have to substantially reduce their doses and
leaving new patients without access to the medication
ISO 55000 - Asset
Management
Process to develop ISO standard started in 2010
System
Builds on PAS 55
 Expands from physical assets to include all types
of assets (except HR and Financial)
 Applicable to all types and sizes of organization
 Forces organizations to define the ‘value’ assets
provide, not the cost
 Brings finance into the equation
 Breaks down silos
ISO 55000 - Asset
Management
System - Vision
 It's not really about managing assets; it's more about actually delivering
the business objectives by extracting value from assets
 in particular by integrating asset management and process safety
principles - Martin Sedgwick, Head of Asset Management at Scottish
Power
 Asset management has been evolving for the last ten years, and what
we’re seeing now is a more integrated approach. The way things are
going to operate, I believe, in the future, is more integration between
operations and the investment, which will make us more effective,
more efficient, and actually almost give better service to our customers
- Chris Royce, Head of Strategic Asset Management at Anglian Water
ISO 55000 - Asset
Management
System - Timeline
Global Trends in Asset
Management

 Questions?