28 Sep 2021
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Is compliance with ISO 550001 essential for effective Asset Management?

Øyvind Giske Rostrup
By Øyvind Giske Rostrup

Partner, Enterprise risk, Business Consulting, EY Norway

A transformational leader who is passionate about government and public sector. Loves sailing and cycling, a proud husband, and a father of two.

28 Sep 2021
Related topics Power and utilities Infrastructure Government and Public Sector
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ISO 55001 can be a transformative framework for asset-intensive companies as long as the end goal is value creation and not compliance.

In brief
  • Asset-dependent organizations face increasing demands from customers, stakeholders and regulators to improve performance. 
  • The international standard for asset management systems – ISO 55001 – offers organizations a practical framework for increasing maturity. 
  • Compliance with ISO 55001 is a good starting point for asset-intensive businesses, though this approach alone is unlikely to lead to long-term value creation.

Asset management is about optimizing the relationships between cost, risk and performance within businesses that rely on physical assets for success. The more optimized these relationships are, the more likely the business can generate value for its stakeholders (for example, reducing operating costs, improving safety levels and increasing customer satisfaction). As demand for timely and cost-effective transport infrastructure, housing and utility services continues to rise, so has the pressure on asset-intensive organizations to improve performance.   

In response to this challenge, the international standard for asset management systems – ISO 55001 – has emerged as a leading framework favored by organizations looking to measure maturity, boost the capability and deliver greater stakeholder value.  

ISO 55001 as a catalyst 

The publication of the ISO 55001 standard was an essential catalyst for the asset management discipline. Since its introduction in early 2014, the standard has gained widespread credibility among professionals by helping them embed more structured and systematic approaches to asset management systems. ISO 55001 has also proved useful for asset management professionals in identifying, framing and resolving important business issues that impact effective asset management. This includes various topics, such as the amount of senior management commitment to asset management activities, the degree of coordinated planning between asset management functions and other internal departments, and the level of asset management awareness among sub-contractors or third parties.  

Compliance with ISO 55001  

As the asset management discipline becomes further professionalized (as evidenced by significant growth in the market for audits, maturity assessments and training), compliance with the ISO 55001 standard has become a more commonplace ambition for asset-intensive organizations. Furthermore, a greater number of organizations are pursuing official certification in ISO 55001 to assure internal and external stakeholders that effective asset management systems are in place. This trend has led to a great discourse within the asset management community on the status of compliance, its business value and whether certification can guarantee better stakeholder outcomes. 

ISO 55001 compliance

71 %

of respondents assess their organization as being non-compliant with ISO 55001

EY survey findings

A key finding from the EY Enterprise Asset Management Survey 2021 reveals that 71% of respondents assess their organization as being non-compliant with ISO 55001. As defined by the Institute of Asset Management, compliant is characterized as having a “formal documented asset management system embedded in the organization,” where “the performance of the asset management system elements are measured, reviewed and continually improved to achieve the asset management objectives.” Therefore, while it may come as a surprise that as many as seven out of 10 asset management professionals view their organization as not meeting compliance status, the finding likely reflects a general sentiment among those working with physical assets. However, there is still a long way to go for many asset-dependent organizations when it comes to achieving desired capability levels.  

Compliance versus value

Asset-intensive companies that have achieved a leading state of capability understand that true value creation lies in the ability to get more work done with fewer resources, in line with organizational risk appetite and performance targets. Compliance with the ISO 55001 standard can certainly help here by ensuring the organization has a solid foundation for delivering effective asset management practices. A good example of this is the standard’s relentless focus on viewing assets as things that generate business value, as well as its strong advocation of risk-based and cost-benefit-driven approaches to managing assets. However, for asset-dependent organizations under pressure to deliver more for less, ISO 55001 compliance is unlikely to be enough in meeting the rising expectations of regulators, lawmakers, investors and customers. This is because effective asset management ultimately depends on building an organizational culture around continuous improvement of capability, not conformance with standards. Companies that become too focused on achieving ISO compliance run the risk of encouraging a compliance culture, where certification – rather than shareholder and stakeholder value – becomes the end goal. 

Summary

The ISO 55001 international standard provides a useful framework for asset-intensive organizations to establish effective asset management practices. Compliance with ISO 550001 can help organizations extract greater value from asset management by enabling structured and benefits-driven ways of working. However, compliance alone is rarely enough to deliver the desired step-change in performance most companies are seeking. Instead, organizations should shape organizational culture, engagement and efforts around what constitutes actual value to stakeholders and how it can be delivered through asset management activities. This is critical for organizations seeking sustained improvement in asset management capability and better stakeholder outcomes.

About this article

Øyvind Giske Rostrup
By Øyvind Giske Rostrup

Partner, Enterprise risk, Business Consulting, EY Norway

A transformational leader who is passionate about government and public sector. Loves sailing and cycling, a proud husband, and a father of two.

Related topics Power and utilities Infrastructure Government and Public Sector
Upvote