Asset Management | Sustainability | Climate Change | Digital Transformation | Change Management | Strategic Alignment
Today's Guardian article "Thames Water's turnaround plan to be supervised by independent monitor" (7 August 2024) highlights a paradox in our water sector: despite widespread adoption of ISO 55000 standards, we're still facing significant market failures. As a Fellow of the Institute of Asset Management, I believe we must examine why our current asset management practices are falling short and how we can empower asset managers to make better decisions. The root of our current crisis lies not in a lack of standards, but in how they're implemented and the broader context in which decisions are made. I propose we focus on the following areas: 1. Aligning Incentives with Long-Term Sustainability: The current regulatory and financial framework often incentivizes short-term thinking, despite the long-term nature of water infrastructure. We need to redesign these incentives to reward decisions that prioritize long-term asset health and sustainability. This could involve: - Longer regulatory periods to encourage more strategic planning - Financial incentives tied to long-term asset performance metrics - Penalties for underinvestment in critical infrastructure 2. Enhancing Decision-Making Tools and Processes: While ISO 55000 provides a solid framework, asset managers need better tools to make complex decisions in an uncertain environment. We should focus on: - Developing more sophisticated risk assessment models that account for climate change and other long-term trends - Implementing advanced data analytics and AI to improve predictive maintenance and investment planning - Creating decision-support systems that better balance financial, environmental, and social factors 3. Strengthening Governance and Accountability: The recurring issues in our water sector suggest a need for stronger governance. Key levers here include: - Mandating more diverse boards with expertise in long-term infrastructure planning - Increasing transparency in decision-making processes and investment plans - Implementing stricter accountability measures for asset management decisions These recommendations aim to address the underlying reasons why our current asset management practices, despite following ISO 55000, haven't prevented market failure. By focusing on incentives, decision-making tools, and governance, we can empower asset managers to make better long-term decisions. The challenges in our water sector run deeper than adherence to standards. We need a fundamental shift in how we approach asset management, one that truly aligns the interests of water companies, regulators, customers, and the environment. Only then can we hope to create a resilient and sustainable water sector that serves the public interest for generations to come. #AssetManagement #SmartRegulation #Governanance
Achieving sustainable business through the application of infrastructure asset management principles
2moGreat thoughts, Ashley. However, there is another challenge, to move away from only considering cost in financial terms. Many of the issues the water sector face today would not be so severe if cost to humanity and the environment had been addressed.