Growing risk awareness and a dangerous business environment may have prompted
an increasing number of companies to invest in disaster recovery – but how safe
is that investment?
Few organisations have any real insight into the true extent of their
corporate assets. In fact, on average, around 50% of assets on the register
cannot be located. Given that business continuity is so important, why are so
many companies failing to retain control over essential asset information?
Asset management is a fundamental business process. It determines corporate
value and has a direct impact on profitability. While most companies have good
systems in place for recording initial investments, they pay lip service at best
to managing later asset disposal.
On average, physical audits reveal that only 40% of assets are well described
on the register and can be easily found; a further 40-50% probably exist, but
are so poorly described it is impossible to prove, and the remaining 10-20% are
well described but cannot be found, indicating they no longer exist.
A major issue here is the complete lack of co-ordination between the asset
register recorded within finance and the inventory lists used across the rest of
Within finance, the primary objective is to record the asset value for
depreciation purposes. As a result, assets tend to be consolidated into a single
figure irrespective of the number or complexity of the component parts. While
this may appear adequate, it provides no opportunity for tracking the asset
across the organisation throughout its lifetime.
This same asset may well be recorded in far more detail within the IT
department. And, to be fair, given the drop in the cost of technology, many fall
below the capital value threshold set by companies.
Thus there is no requirement for finance to record each item in detail.
However, while IT is, typically, good at maintaining its own inventory register
to determine system maintenance and support, such information rarely finds its
way to the finance team. And, of course, most finance teams regard the issue as
self-resolving: the majority of the assets no longer in use have already been
depreciated to zero, so there is no impact on corporate value.
Any inconsistency in the asset register or inability to reconcile the asset
value in finance with multiple inventory records will raise significant doubt
for insurance companies.
With this in mind, is there really any excuse for such poor control over key
Keith Dolby is managing director at Real Asset Management
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