Risk mitigation is an integral part of managing assets. This involves weighing the costs and benefits of the entire asset lifecycle and devising plans to minimize errors. With the right tools, businesses can easily overcome asset management challenges and even optimize investments for greater returns.
Using real-time data is the major key to asset risk management. Businesses can access accurate data with suitable asset management software that records lifecycle details that aid in decision-making. Let’s discuss how businesses can do so by first identifying the real challenges and then implementing solutions to combat pitfalls.
What is asset risk management?
A process that identifies, assesses and mitigates risks associated with the organization’s physical assets, such as buildings and equipment, or intangible assets, such as intellectual property or data, is asset risk management. The main goal of this process is to protect asset value and ensure that the organization’s objectives are met.
Top 5 asset management challenges to not ignore
Assets have different characteristics that can be challenging to cater to. Heavy machinery needs to be scheduled for maintenance quite often, while consumable inventory needs to be procured on a frequent basis. Here are some of the common challenges businesses face:
1. High maintenance costs
A common challenge for any business is to track and monitor asset downtime.. This results in a high number of unexpected breakdowns. Failure to accurately track assets can also result in lost warranties that add up in the maintenance costs. It can cause serious financial concerns such as paying for unnecessary wear and tear of the asset. Companies can lose up to 35% of the potential warranties just from repair expenses.
2. Lack of asset visibility
With hundreds of assets to track, managers can find it challenging to determine an item’s location at a certain time. Lack of inventory control and visibility like data records, and documentation, can impact location tracking of assets. Relying on manual records can be problematic since it becomes difficult to track smaller assets that are used frequently and on a daily basis. . If the records are lost somehow or do not exist in the first place, asset managers can lose sight of assets altogether resulting in ghost assets.
3. No asset tagging
Frequently losing assets can be a sign of poor labeling or tagging. Without asset tags, it becomes very difficult to track an item throughout its lifecycle. Even if the item is not properly tagged according to its physical requirements, the tag will be of no use to the business. Lack of tagging may result in difficulty to maintain a dynamic data profile of major fixed assets.
4. Insufficient data to drive decisions
A common asset management challenge for businesses is to gather data about daily operations. This can include keeping track of procurement and maintenance costs. Without a proper system designated to record asset breakdowns and repairs, there is no accurate count of the number of service sessions being carried out.
Other than this, failure to monitor custody of assets can result in a high number of items being misplaced, again adding to costs. Insufficient data can lead to biased decision making which can lead to slow growth and productivity.
5. Failure to meet compliance
Dealing with different types of assets means keeping up with various compliance regulations. With a number of departments involved and teams working across sites, it can get challenging to meet the set guidelines at all times.
Sometimes, the compliance policies are not readily accessible to everyone who is using the asset. In such situations, it is very common to miss out on important compliance policies. Failure to meet compliance can lead to frequent breakdowns, heavy penalties and greater fines.
Steps to identify asset management issues
While there are challenges in maintaining the assets, you can easily identify the asset management issues in four easy steps:
1. Classify assets
First of all, asset managers need to classify all of the organization’s assets. It includes both physical assets and intangible assets. Information about the assets is recorded and categorized to easily find the necessary information. For this purpose asset management software is of great help in tracking organizations’ assets and giving you real-time insights.
2. Assess risks
The next step is to identify any threat or risk associated with these assets. For example, you might have a vehicle that requires regular maintenance. Without scheduled maintenance sessions the assets will depreciate faster than expected, resulting in low value. In order to overcome asset management challenges, it is important to identify such risks for every asset.
3. Mitigate risks
An asset manager will resolve the identified risks. They are highly trained professionals with the right expertise to use asset tracking software to better manage physical assets. The advanced features of the software allow you to track issues, highlight asset utilization, generate reports when needed, and more while keeping you notified.
4. Monitor and review
If you think asset risk management is a one-time process, you are wrong; it’s an ongoing process. An organization needs to regularly monitor and review asset performance for multiple reasons, such as optimizing assets, tracking assets better, and decreasing an asset’s depreciation. If an organization effectively manages its fixed assets, it can reduce operational costs and improve overall asset performance.
7 Tried and tested asset management strategies
Asset risk management is important because it improves asset performance and operational efficiency while reducing downtime. Here are some proven asset management strategies to implement and benefit from:
1. Tracking asset history
The biggest challenge is to track asset usage over time. Without a dedicated system, businesses fail to document how an asset is being used across its entire lifecycle. By using an automated solution businesses can track an asset’s maintenance history with all the details of spare parts, inventory consumed and costs incurred. Having access to such data is useful in compiling a report on asset performance and returns.
Other than this, tracking assets is important for maintaining an optimal stock level. If a business can monitor stock levels at all times, this can help create minimum threshold levels. Every time the threshold is reached, an alert will be sent out to procure new stock.
2. Scheduling maintenance
Preventive maintenance tasks are of utmost importance for asset managers. Why? Because they automatically identify and generate the schedules for repair based on factors such as the age of the asset, and its usage. This preventive measure takes place regularly.
A good asset risk management strategy also includes real-time visibility of the status of the asset so you can plan the maintenance schedules. You can easily identify trends and patterns to make the right decision on how to utilize the assets.
3. Maintaining accurate location records
Did you ever lose an asset at the eleventh hour? It’s more common than you can imagine, which is why maintaining accurate records in a cloud-based system is important.
Tagged assets can be scanned and entered into the system with the default location. Any time an asset is moved, the user can enter the new location to keep records updated.
Location tracking is also helpful when it comes to procurement management. Every time stock is ordered at a different office location, it is important to record the storage location to avoid over or under procurement.
4. Managing asset costs
Asset managers are always looking for ways to manage costs related to assets. Tracking expenses, such as maintenance activities, indicates how well the asset is managed. Managers can identify the amount being spent on daily and recurring expenses. You can pinpoint areas of improvement where cutting costs will not impact the asset’s performance, enabling you to make an informed decision.
Forecasting costs enables asset managers to plan and execute the right budget for the future. Running a cost analysis report gives you detailed insights regarding the present expenses and costs that can drive budget decisions.
5. Ensuring compliance and regulations
You may have a long list of assets ranging from heavy-duty equipment to software and hardware used in the office. But are they fulfilling the compliance requirements and regulations that apply to the organization’s industry? Compliance and regulations may sometimes be overlooked but it can be a cliffhanger for your organization.Â
To ensure that relevant regulations such as safety, environmental protection, and asset disposal are properly followed, asset managers can apply regulation tracking for each of the assets using the asset management software. You can generate compliance reports and set alerts and reminders in advance to notify if the inspection date is approaching. In case a regulation is violated, you can get the necessary alerts as well to take corrective action before any issue arises.
And let’s not forget about the compliance audit trails, right? You will need to maintain and update documentation of all compliance efforts which you can do so with the cloud-based asset management software with backup.
6. Boosting asset value
Managers are responsible for managing the entire asset lifecycle, from the point of acquisition to disposal of the asset to maximize asset value and reduce costs. So as an asset risk management strategy, you need to first take care of the asset performance management by tracking the asset utilization and displaying the visibility in achieving organizational goals. Managers can then identify opportunities to improve asset value and utilization.Â
Planning a proper asset disposal, especially in the construction, manufacturing, and healthcare industries, is another cost-effective strategy to boost an asset’s value. How? You can automate tasks to alert you about tracking asset performance with the tracking software. With a centralized dashboard, you can identify the assets that are no longer useful for business growth.
7. Implement automated systems
Organizations must invest in the best software for tracking assets to automate their operational processes. It is a cost-effective and time-efficient way to gather and manage asset details, develop clear protocols, maintain checklists, and make plans for successful asset management.
You can use the software to analyze details such as history records and predict disasters that may happen in due time. Using advanced technologies is part of the risk management strategy that will address any error and asset-related query to fix the failure and upkeep.
Overcome asset management issues to upscale business growth
Investment in assets is just one side of the coin while managing the risks associated with assets can increase the chances of losing revenue and generating more expense. Without a firm strategy for asset risk management, mountains of unwanted disposals, and selling of assets– can result in business losses in the long run.
Businesses can mitigate risks by implementing asset tracking software that gives insight into the financial constraints that may previously have been hidden. Companies can smartly manage their assets by tagging them to track their locations and come up with strategies to reduce asset risk while optimizing value.
