All board directors are asset managers, entrusted to manage and generate value from investments for the organisation and its stakeholders. Dr Monique Beedles FAICD, author of ‘Asset Management for Directors’ shares her top three tips on how directors can best approach asset management.
An important part of a director’s and the wider board’s role is to manage the capital that has been invested into the organisation and to produce a return on this investment for its stakeholders. It is part of a director’s fiduciary duty and involves the board using its best collective judgement to make a decision that is in the best interests of the organisation.
Regardless of the organisation’s context: a listed company with shareholders, a not-for-profit organisation where people have donated funds, or a government body entrusted with tax payer money; an investment has been made and directors are obliged to deliver value to stakeholders from the organisation’s assets.
1. Think beyond the obvious definition of an asset
It’s important to understand that assets can be anything that is of value to the organisation. Often when we think about assets we think about tangible assets, like property, equipment, bridges, cars and railways.
However, assets are not only tangible, but can also be intangible. Intangible assets include intellectual property, patents and digital assets. These assets are becoming increasingly important in terms of the value they create for organisations and their stakeholders.
2. Not all assets are made equal
Directors need to take a strategic approach and think about the relative importance of different assets or classes of assets, and how each of these contributes to the overall objectives of the company.
One aspect that is often misunderstood is that depreciation of an asset is not provision for maintenance. This is not an effective approach to asset management, as it assumes that assets depreciate and deteriorate at the same rate. It also assumes that all assets have the same criticality and importance to the business.
3. Asset management needs to engage the whole organisation
Everyone has a role to play in asset management. For boards and their directors, it is important to think about the organisation’s range of stakeholders, what their involvement is in asset management, what their expectations are and how these expectations will be delivered and communicated.
Asset management involves a number of factors including, financial, technical, engineering, people and cultural aspects. From the board’s point of view, it’s important to know how all these aspects integrate and to engage with them along the way.
Visit the AICD bookstore to purchase your copy of Asset Management for Directors. Each of the AICD’s titles comes with a complimentary webinar hosted by the author.
