November 12, 2019, 8:49 am

The New ISO TS 55010-2019 – What’s it about?

QuestionMark500Finance is an integral part of Asset Management. Asset management is defined as “coordinated activity of an organization to realise value from assets”.  Value can be financial (revenues and costs) and non-financial (benefits and risks) and achieving the balance between these requires coordination and alignment across financial and non-functions in the organisation. One of the key outputs of the asset management planning process is an estimate of the cashflows that are needed to deliver value from assets and to support achievement of overall business objectives.  These cashflows could be operating expenses (OpEx) or capital expenditure (CapEx) as well as revenues that flow from this expenditure.  In many organisations, this coordination and alignment across financial and non-functions is often inadequate. Consequently, ISO/TS 55010 has been produced to provide guidance on achieving alignment across the financial and non-functions of an organisation.

So, what is ISO/TS 55010:2019 Guidance on the alignment of financial and non-financial functions in asset management about? The first thing is that it is a guide, and as a guide it does not provide any interpretation of existing ISO 55001 requirements, nor does add any new requirements to those currently contained in ISO 55001 Asset Management – Management systems – Requirements.

Those requirements include the following:

  • In understanding stakeholder requirements and expectations, Clause 4.2 requires consideration of recording and reporting of financial and non-financial information,
  • In setting asset management objectives, Clause 6.2.1 requires consideration of financial requirements,
  • In planning to achieve asset management objectives, Clause 6.2.2 requires this planning to be integrated with other organizational planning activities, including financial functions,
  • When considering asset management plans, Clause 6.2.2 also requires determination and documentation of the financial implications of the plan,
  • In relation to information, Clause 7.5 asks organisations to determine the requirements for alignment of financial and non-financial terminology relevant to asset management, and ensuring consistency and traceability between the financial and technical data and other relevant non-financial data to the extent required to meet legal and regulatory requirements, and
  • In evaluation performance, Clause 9.1 requires evaluation and reporting on asset management performance, including financial performance.  

The recently updated ISO 55002:2018 Guidelines for the application of ISO 55001 also provides guidance around considerations of finance and contains an informative annex containing information on the relationship between financial and non-financial functions in asset management.

The intent of ISO/TS 55010 is to provide guidance on how to achieve better alignment between an organisation’s financial and non-financial functions. The guide itself is 46 pages in length with the preface pages; 16 pages cover the body of the guidance with the remaining pages dedicated to seven informative annexes.

Following on from the Forward, Introduction, Scope and Normative References, the body of the guide contains the following sections:

  • Section 3 Terms and Definitions. What is interesting here is that a whole range of commonly used financial related asset management terms are now formally defined. For example, Capital Expenditure.
  • Section 4 Why Alignment Between Financial and Non-financial Functions is Important. As the required value of an asset can be both financial and non-financial, this section sets the scene with Top Management asset management related questions and the types of benefits organisations can expect with aligned financial and non-financial functions; the bottom line being better decision making.
  • Section 5 Enablers for Alignment. This section discusses the role of business processes, leadership and governance as key enables for alignment, with policy, strategy, data and information supporting alignment, including developing common terminology for use across the organisation.
  • Section 6 How to Achieve System Alignment. This section discusses the importance of information systems and data management to achieve aligned financial and non-financial functions.
  • Section 7 How to Achieve Asset Register Related Alignment. This section discusses financial and non-financial registers and for common link to exist in each register to allow full alignment to be achieved.
  • Section 8 Financial Planning for Asset Management. This section discusses capital investment planning, long term financial planning and budgeting given that these are an integral part of asset management.
  • Section 9 Performance Management. Good financial management involves both financial accounting and management accounting. This section discusses performance measurement and performance and financial reporting to provide aligned financial and non-financial asset related information to support good financial management.

There are seven informative annexes that provide:

  • Guidance on capital investment planning,
  • Guidance on long-term financial planning,
  • External financial reporting standards and principles,
  • Financial accounting functions for financial reporting, such as valuation and depreciation,
  • Non-financial functions in asset management in asset life cycle activities,
  • An example of an organisation attempting to improve the alignment of its financial and non-financial functions, and
  • Cost input to pricing for product or service.

In summary, ISO/TS 55010 is a guideline to support organisation’s aiming to achieve alignment across the financial and non-financial functions of asset management. As a guide, it probably won’t provide you with all the answers you may be seeking in solving any alignment issues your organisation may be having, but it can certainly assist you on your journey.    

ISO/TS 55010 was published on 26 Aug 19 and is available through the SAI Global Store at https://infostore.saiglobal.com/en-au/Standards/ISO-PRF-TS-55010-2019-1162781_SAIG_ISO_ISO_2763288/.

 

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