Critical Assets: Why Understanding These Assets is so Important

Not all assets are created equal: some are far more critical to an organisation than others, so it’s important to identify those assets that have a high consequence of failure. Here’s how to identify and report on critical assets – and there are some significant benefits in doing so.

What are critical assets?

A critical asset is where there are severe consequences should that asset fail. Whereas most organisations focus on the impact on continued business operations, it does depend very much on the industry. Other undesirable situations that can be the result of the failure of a critical asset may include:

  • Restricted operations with financial and/or service impacts.
  • Poor health and safety outcomes.
  • Unattractive appearance: this may be of particular importance in the hospitality or retail sectors.

Combinations of consequences are also possible, for example, a critical asset failing may have operational, financial, and health and safety impacts.

To get an understanding of critical assets within different organisations and sectors, let’s look at some examples:

  • In the housing sector, roofs are considered critical assets. Because if the roof fails and water gets into the building, the structure and fittings underneath risk getting severely damaged and would need to be repaired or replaced.
  • In a shop or office building, the front door and the lock on that door are critical assets, as they control access to the building and are also points of egress in an emergency.
  • In hospitals, the elevator between the Emergency Department and wards would also be a critical asset; whereas the general elevators for public use may not be considered as critical. This means that a whole asset class is not necessarily critical it may be considered an individual asset level, in the context of its role or function and the risk presented.
  • In aged care, however, all of the elevators in a multi-level building would be considered critical assets. Thus modern aged care facilities aim to have at least two sets of elevators in a building so that one’s available if the other is out of service, whether it’s due to breakdown or planned maintenance. This is the concept of providing redundancy should one asset fail or be out of service temporarily.

Understanding an organisation’s critical assets, and identifying those with the highest consequence of failure, is a key function of the role of an Asset Manager. This involves considering how an asset might fail, as well as identifying the consequences of failure, including how to mitigate the impact of failure, if possible.

How do you identify critical assets?

An Asset Manager needs to take a pragmatic approach in identifying critical assets. It’s a matter of considering the purpose of an asset or a building and evaluating its overall importance within the organisation. This is likely to involve examining the associated Levels of Service related to that asset or asset class. Hyperlink to: 

Evaluating the importance of an asset is likely to involve assigning a criticality rating to that asset or asset class.

Criticality is scored on a scale, and the scale varies from organisation to organisation. SPM Assets software typically ranks criticality on a scale of 1 to 5.

When ranking criticality, an Asset Manager should consider the impact of the failure of that asset, regardless of condition, in the context of impact on operations, health and safety, and other outcomes.

For example, local government facilities such as libraries may be rated as high importance, whereas community halls may be of lower importance. In this case, we are considering criticality at the entire building level relative to each other in terms of their function across a portfolio.

What action should you take once critical assets have been identified?

Once critical assets have been identified, it’s important to have regular inspections with clear and timely reporting, so that issues are escalated as necessary. This involves developing planned preventative maintenance schedules against the critical assets that have been identified.

Talk to your service provider about support for your organisation’s critical assets: do they have a good inventory of spares available at short notice - or will spares be coming from overseas with accompanying long lead times? Make sure your contracts with suppliers adequately address your critical asset needs in terms of responsiveness and appropriate care.

Some organisations use the concept of redundancy. For example, if chilled water supply for air conditioning is critical to the organisation, they may have a surplus chiller capacity available that allows for a unit to be taken offline for maintenance or if it should unexpectedly fail. However, if all the chillers are the same age, that in itself presents some risk – especially if spares become unavailable. So in this instance, it could be worth cycling a phased replacement program over a number of years, so that the operational risk of multiple assets failing is minimised.

How often should you report on critical assets?

Because of their high-risk status, critical assets tend to be inspected and reported on more frequently as a matter of course. This is often through maintenance contracts, so there are more eyes on the assets operationally.

So it will very much depend on what the asset is, the service it provides and how it is being managed and looked after, as to how often it is reported on. ISO 55000 doesn’t specify any reporting frequency; rather, it’s very much driven by the organisation’s business needs. Organisational factors that may influence the frequency include the industry/sector; the level of asset management maturity within the organisation; data availability and confidence; and executive/Board requirements.

The government sector will have reporting frequencies set for them; for example, in New Zealand, the Ministry of Health has specifications for District Health Boards.

How to report on critical assets in SPM Assets software

SPM Assets core software module has three standard criticality measures for assets:

  • Appearance: considering the importance of an asset’s appearance. For example, a painted finish in the reception area of a five-star hotel may be considered more critical than the condition of the walls in a storage cupboard.
  • Consequence of failure on the business operation: this may be related to financial loss, downtime, the ability to supply services, and the image of the organisation.
  • Safety: the impact on employees and contractors, as well as the public/customers.

When assessing the overall critically of an asset you are likely to weight these measures, for example, healthy and safety might make up 50% of the overall asset criticality measure. 

Some industry-standard criticality measures are already provided in SPM Assets software by default. So the Asset Manager isn’t starting with a blank template; there’s criticality data already there to help make their job easier.

It’s then up to the Asset Manager to confirm the asset criticality settings are appropriate for their organisation. If the AM wishes, they can specifically identify the critical assets by assigning a user-defined field in the software for this purpose.

Summary of benefits

Reporting on critical assets has a number of benefits:

  • Achieving levels of service: Keeping close tabs on your critical assets – and keeping them operating smoothly – helps your organisation achieve its levels of service.
  • Awareness and communication: Let’s face it; you don’t want to be held responsible if a critical asset fails on your watch. By identifying and reporting on critical assets, it makes senior management or the executive board aware of any risks.
  • Business continuity planning: The function and importance of critical assets should feed into an organisation’s Business Continuity Plan.
  • More accurate budgeting: Better awareness and reporting of critical assets means that budgets can be managed better, including the ability to prioritise the replacement of critical assets appropriately. For example, if critical assets are in a poor condition it can be identified when they are likely to need replacing, whether the costs all come to fruition in one year, or whether it can be spread out over a longer period.
  • Moving towards planned maintenance: Critical assets should have a robust planned maintenance profile to ensure they are well looked after. By reporting on critical assets, the organisation can consider if existing planned maintenance is adequate, or if reactive maintenance is excessive, aiding the enhancement of planned maintenance in an organisation.
  • Prioritising resources: Identification and awareness of critical assets ensure they are more likely to obtain the recognition they need, in terms of budgetary allocation and planned maintenance. This can also mean that lower-risk assets are identified so they don’t receive disproportionate attention and expenditure.

    “We use SPM’s criticality settings at asset level to help define a risk rating against each project within a programme of work.

    Our priority is focused on high-risk items, aligned with the NAMs and ISO 31000 risk management approaches. This methodology has been welcomed by management as we can justify, and they can see, we are allocating resources in the right places.

    This clarity has allowed us to exclude low risk ‘noise’ from the key infrastructural projects that may have been otherwise overlooked.” - Lindsay Fleming, Asset Manager, University of Canterbury

Next step

Do you need help identifying and reporting on your critical assets? Talk to us today.