Overview

The nominal end of the life cycle of any asset is often when the asset owner decides to remove the asset from their portfolio.

This removal is intended to free the owner from any further responsibility or liability associated with the asset.

Assets are abandoned as they reach the end of their useful life or there is no value or market for the functions they provide.

Organizations need to understand the residual responsibilities and the liabilities that these assets may represent. The total viability of an organization may be threatened by the sheer value and operating costs associated with its asset portfolio, if not managed correctly.

Highly profitable businesses should always assess the individual returns and contributions made by their various assets and rationalize and dispose of those that are not providing adequate returns or play no critical part in their service delivery (non-core assets).

Asset rationalization and disposal is a vital strategy that needs to be considered as part of all asset management plans.

When a decision is made that asset rationalization or disposal is a key element of an organization's future viability, considerable effort needs to be made to assess the most appropriate strategies (ie those that take into account all stakeholder interests). The way in which this is handled, both publicly and politically, will be a key to the ultimate success of the program.

The organization will need to develop a policy that shows why rationalization and disposal will be considered. The reasons may include:

• The organization cannot afford to retain the asset stocks it owns or has full responsibility for
• The full economic cost (or the full operating costs) exceeds customers' willingness and / or ability to pay
• The organization cannot derive an adequate return on these assets
• The organization needs to rationalize its asset base to better meet future financial commitments and an increased range and level of services.