Why investing in resilience needs to be a priority
Asset management goes beyond simply maintaining assets—it involves identifying and mitigating risks that could disrupt operations. However, in today’s climate of uncertainty, risk-based asset management alone isn’t enough as it’s typically limited by a focus on known threats to operations and strategy.
With evolving challenges such as climate change, supply chain disruptions, inflation, and other unpredictable events, investing in resilience has become essential. Organizations must adapt by prioritizing not just asset longevity, but their ability to withstand unforeseen risks.
Planning for and managing uncertain risks
Traditionally, risk management has focused on anticipating known, predictable threats. But the rise in Black Swan events has shown that relying solely on this approach is no longer enough. The unexpected can — and frequently does — happen, which is why we need to rethink how we prepare for and respond to risks.
A prime example of this phenomenon is climate change. While asset managers and infrastructure owners are well-aware of the effect more frequent severe weather events can have on their assets, it’s possible that we’re underestimating the rate at which climate change is accelerating. As a result, the way asset managers anticipate degradation and evaluate the long-term risk of an asset may not reflect the reality.
Rather than simply evaluating an asset’s risk, investing in resilience encourages a more proactive, adaptable strategy that goes beyond traditional risk management actions.
Uncertainty isn’t just something to plan for; it’s something that needs to be embedded in decision-making at both the strategic and operational levels. By considering uncertainty as a key factor in planning, organizations become more agile and better equipped to handle unforeseen circumstances.
Defining resilience
A resilient organization is one that can adapt quickly to changing circumstances.
But this resilience is not simply about being flexible. It’s understanding where changes and trade-offs are going to happen in the short-, medium, and long-term, while also having the ability to implement them swiftly.
And though adaptability and resilience are cultural and structural issues within an organization, these traits can be developed with the right tools. For example, Asset Investment Planning (AIP) solutions can significantly boost an organization’s resilience.
AIP solutions empower organizations with what-if scenario modeling, enabling them to simulate various future scenarios and assess the potential impacts on their assets and operations.
This capability allows asset managers, risk managers, engineers, and executive decision-makers to test different strategies under varying conditions, such as extreme weather events, sudden budget constraints, or shifts in regulatory requirements. By analyzing these scenarios, organizations can proactively identify vulnerabilities and make data-driven decisions to optimize resource allocation, ensuring critical assets remain operational even in the face of unexpected challenges.
Moreover, what-if scenario modeling supports long-term planning by helping organizations balance short-term needs with long-term goals. It enables leaders to explore the trade-offs between immediate investments and future risks, ensuring that resilience-building measures are both cost-effective and aligned with overarching strategic objectives.
This foresight equips organizations to anticipate disruptions and pivot quickly, transforming uncertainty into a manageable part of their operations, tactics, and strategy.
Exploring resilient investment scenarios
At the core of resilience is effective decision-making. And in today’s data-driven world, making informed decisions is critical. Resilience, therefore, must be supported by accurate, fact-based data that helps organizations assess risks, plan interventions, and optimize resources.
What makes an Asset Investment Planning solution invaluable when assessing the opportunities to invest in resilience is that it can combine a wide variety of data to make sure an organization has everything they need to make informed decisions.
Data that drives resilient investment scenarios and can be integrated within an AIP solution include:
Asset Data
Asset Inventory: Details about each asset, including type, location, age, and specifications.
Condition Data: Current condition ratings or assessments for each asset.
Criticality: The importance of each asset to organizational operations (e.g., high-priority assets like water mains or power transformers).
Lifecycle Information: Expected useful life, degradation curves, and maintenance schedules.
Operational Data
Usage and Performance Metrics: Data on asset utilization, capacity, and performance over time.
Failure History: Records of past failures, incidents, and downtime.
Financial Data
Capital and Operational Budgets: Available funding for maintenance, repairs, and new investments.
Cost Estimates: Costs for maintenance, repair, replacement, or upgrading of assets.
Revenue Projections: Potential income or savings from investing in particular assets.
Risk and Resilience Data
Risk Profiles: Information on risks such as extreme weather, seismic activity, or supply chain disruptions.
Failure Impact Data: Consequences of asset failure, including financial losses, service interruptions, and safety hazards.
Resilience Metrics: Indicators of an asset’s ability to withstand and recover from disruptions.
Environmental and Regulatory Data
Climate Models and Projections: Data on anticipated changes in weather patterns or sea levels.
Compliance Requirements: Information on regulations affecting asset management, such as environmental standards.
Scenario-Specific Data
Hypothetical Event Data: Data for stress-testing assets under different scenarios, such as natural disasters, economic shifts, or technological changes.
Mitigation Strategies: Potential interventions, such as backup systems, redundancies, or green infrastructure investments.
Strategic and Planning Data
Long-Term Goals: Organizational objectives, such as carbon neutrality or service reliability targets.
Intervention Strategies: Potential responses, including maintenance, upgrades, or retirements.
Priority Rankings: The relative importance of different assets or projects in meeting organizational goals.
Integrating these data types allows organizations to model various scenarios, optimize interventions, and ultimately enhance their resilience to both expected and unexpected challenges.
Investing in resilience is a strategic imperative
Resilience isn’t a luxury—it’s a necessity.
Organizations must invest in building resilience in their asset management and capital investment plans. By taking a proactive, data-driven approach to resilience, organizations can improve their ability to weather storms, both literal and metaphorical, and position themselves for long-term success.
To find out more on how Asset Investment Planning solutions can help your organization become more resilient by creating an unlimited number of possible investment scenarios, talk to an expert today.
