I often preach that an Asset Manager shouldn’t play Treasurer! A dollar is a dollar whether it is for something new (CAPEX) or keeping something going (OPEX). I also don’t really care where the money comes from: someone’s budget, a grant, or “robbing Peter to pay Paul”. A budget has its own lifecycle, usually annual. An asset, on the other hand, will typically have a lifecycle of multiple years. So why is it so difficult for finance to shift its thinking, and sometimes its behaviour, from “budgets, reporting, and control” to “assurance, investment, and value”? The real problem is that budget changes often reduce necessary maintenance, and that goes unnoticed until years later, when someone asks, why is this machinery failing now when it was working fine previously?
An annual budget is a necessary management tool.
Unfortunately, assets don’t organise their deterioration, failure modes or renewal requirements around financial reporting periods.
This creates an interesting tension.
Deferring maintenance may improve this year’s financial result. However, the consequences may not become apparent until several years later.
Similarly, investing in improved asset information, reliability or workforce capability may produce benefits that extend well beyond the current budget.
Neither decision is inherently right or wrong.
The challenge is whether the organisation understands the longer-term implications.
Asset Management encourages us to consider cost, risk and performance across the lifecycle. Yet many organisational processes encourage us to think in annual increments.
From an Organisational Change Management perspective, this requires more than introducing lifecycle costing methodologies.
Finance, operations, maintenance and executive leadership need a shared understanding of how short-term decisions influence future obligations.
They also need the governance and information to make those trade-offs visible.
The objective isn’t to eliminate financial constraints. It is to ensure those constraints are considered with an understanding of the consequences.
A saving this year may be a cost next year. The important question is whether we made that decision knowingly.
#CAPEX #OPEX #AssetLifecycleManagement #StrategicAssetManagement #FinancialGovernance #RiskBasedDecisionMaking #AssetInvestmentPlanning #WholeOfLifeCosting