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 - Operational Excellence

Market Share Matters

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.
Zachs Investment Reseach
Bearish on Sunocos Future

significant planned and unplanned downtime in both Suncors upstream and

downstream operations as a cause for concern
Suncor: Estimates Too High?
Globe & Mail, June 24, 2011

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 Cant 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 medicationlimiting 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

System

Process to develop ISO standard started in 2010

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
were 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?