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PAS 55 Tip: Top-Down Alignment Of Objectives

To sort out the picture, greater understanding of the Asset Management business model is certainly needed at board level and in regulatory circles. Separation into 'Asset Owner', Asset Manager and Service Provider roles is not enough - a good start, but not enough. Greater risk awareness and the better targeting of capital investment are not enough. A top-down clarity of the conflicting business drivers, their relative and absolute significance or criticality, and optimization or trade-off mechanisms are needed.

The Balanced Scorecard must be appropriately calibrated - with real money values placed on the various conflicting performance attributes (that's why money was invented in the first place - to ascribe appropriate value to dissimilar commodities so that they could be traded). Until there is a calibration mechanism, it is impossible to demonstrate that, for example, sacrificing 20% of the innovation 'score' (such as reduced R&D activity) might be worthwhile to prop up this year's financial results (or vice versa). This goes for all the conflicting business drivers (safety, environment performance, profit, regulatory compliance, social responsibility etc).

Tip from John Woodhouse Asset Management: Concepts and Practices presented at the International Maintenance Conference

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