Asset management is defined as “The coordinated activities of an organization to realize maximum value from it’s assets“; assets are an “item, thing or entity that has potential or actual value”; realization of value will normally involve balancing costs, risks, opportunities and performance benefit.
The term asset management became widely used in the 1980’s relating to physical assets. In the UK the term was adopted in the oil & gas industry following the North Sea Piper Alpha oil platform disaster. The industry responded by forming a small, multidisciplinary team to manage each “asset” – in this case an oil rig – through all stages of it’s lifecycle.
Figure 1 – Asset Lifecycle (credit : Institute of Asset Management)
Asset management is relevant to organisations crossing Government & private sector. The Institute of Asset Management report that – done correctly – effective asset management “improves an organizations reputation & ability to :
- operate safely;
- meet regulatory & statutory obligations
- evaluate future business strategies for the delivery of . . . different risk profiles
- significantly reduce cost of managing assets over their lives.”
How is Blockchain relevant? The multidisciplinary asset management team often work in different organisations and countries. Their information technology systems attempt to keep one agreed view of the asset, but this is difficult due to organisational boundaries, geographical separation and the need for privacy for assets that may be part of the national critical infrastructure. Current systems are often inefficient, prone to fraud or cyber attack and struggle to present a shared, common view of the asset and its history to the team and it’s stakeholders.
Figure 2 – Core Components of Industry Blockchain
The novel alternative Blockchain architecture gives asset management team a shared, single view of the asset updated every time a status change occurs through peer to peer replication. Privacy services (using cryptography) ensure that team members see only the parts of the asset register that are relevant to them, and that transactions are secure, authenticated and verifiable. Blockchain allows a “smart contract” specifying conditions for asset status change to be captured, agreed and automatically executed. Asset management team members agree the methods used for transaction verification – a process known as “consensus”. Government oversight, compliance & audit can be part of the same network.
The Blockchain attributes listed in Table 3 are compelling for asset management:
|Attribute||Asset Management Application|
|Consensus||Significant changes in asset status, ownership, value, repair status etc. are agreed to by all parties in the multi-disciplinary team.|
|Provenance||There is a complete audit trail of the asset right back to its inception. This increases the degree of confidence in the asset information, and completeness of the total lifecycle view.|
|Immutability||Once the asset status change has been recorded in the Blockchain, it cannot be undone. Each team member can be confident that their view of the asset is identical to all other team members.|
|Security||Since the asset registry is replicated between team members, there is no “single point of failure” which in turn renders the information both tamper proof and resilient to fraudulent manipulation and cyber security threat.|
Table 3 – Blockchain Value for Asset Management
Two significant benefits accrue:
- Team efficiency improves through confidence in up to date asset information for whoever needs it. Whether this is a government regulator or a third party value assessor, they will all have the same view of the asset.
- An improved risk management posture results from confidence in asset information with the complete audit trail. The portfolio manager can be on the “front foot”, taking a more aggressive risk based approach in maximizing the organisation’s asset portfolio value.
And finally the Bath Tub Curve? Assets tend to fail early or late in their life, and not so often in the middle. Risk management is improved through the lifecycle if Blockchain is used, i.e. at all stages of the Bath Tub Curve!
- ISO 55000 standard for Asset Management
- IBM on Blockchain
- Blockchain for Government
- Bold with Blockchain
- Blockchain, Where’s my stuff?
- Proving Provenance with Blockchain