Asset Manager – A Key Factor for Business Success

Analyses show that only withdrawal, i.e. ‘retirement’ with the write-off of assets from their life cycle can create more than 10 percent of total costs, but by activating through ‘asset’ management, costs can be reduced by up to 30 percent in the first few years and an additional five to ten percent per year over the next five years.

This is claimed by Berislav Lastrić, the Technical Director of the System Support and Integration Sector at Combis, and we could say something similar for ‘facility’ management. If we mention it in conversation, the most common response in Croatia will be that it refers to cleaning and hospitality. Besides that term, there is also ‘asset’ management, and business people engaged in such management are called asset managers. Unlike us, in the world where this profession is recognized, these managers are a key factor in the success of a company’s business.

Basic Tasks

Dr. Ljiljana Katičić, President of the Croatian Institute of Directors (CID), says that this interdisciplinary title and profession have not been given importance, and even the scientific sector does not feel the need to educate managers for this title and profession. She is very dedicated to this title and explains the difference between ‘facility‘ and ‘asset’ management. For ‘facility’, she will say that in it, the manager manages assets that are not in the function of the core activity. Their primary task is to establish a register of assets with clear ownership, cadastral, and land registry documents and align it with the balance sheet in the business books. It involves technical and hygienic maintenance of assets that are not in the function of the core activity, such as managing a vehicle fleet, hospitality, ICT support, librarianship, and technical and business documentation – archiving.

– An ‘asset’ manager, on the other hand, manages assets that are in the function of the core activity, such as industrial plants, wells, pipelines, rail, maritime, and air transport, highways, etc. It involves capital investments and cost management and their impact on productivity and profitability of the business. Such a function is necessary regardless of whether it concerns state, industrial companies, hospitals, public authorities, retail locations, management of state property, etc. – says Katičić.

The importance of asset managers is perhaps best illustrated by the fact that they are among the most important people in the company and are a key factor in business success because they take care of physical assets, their procurement and selection, investments, technology, maintenance, and renewal of physical assets, as well as oversight of them. Katičić claims that it is a highly sophisticated title and profession because it encompasses a wide range of knowledge, from engineering, economics, law to organizational design. The effectiveness of this type of management is a component of the holy trinity of business, which are operational, business, and strategic plans, which depend on the effectiveness of these managers, as shown by global experiences.

Fatal Neglect

In transitional countries, including Croatia, there are particularly significant challenges facing these two managements. There is no good practice in managing state and local property, the registers of physical assets (physical balance of assets) are not organized, and that property is not aligned with land and business books – the cadastre and land registry. This is one of the tasks of the ‘facility’ manager in the organization. Even if attention were paid to the appointment of such managers in state companies, the problem lies in the lack of an institutional framework for asset management. This is one of the key obstacles to attracting direct foreign investments in most transitional countries.

– In the Croatian case, this problem is even more pronounced because in the state’s balance sheet we have above-average national wealth in physical assets compared to financial ones. Only with a well-defined institutional framework for attracting investments, clean land registries and ownership relations, and organized registers of physical assets will the asset manager contribute to improving efficiency through the use of physical assets. Infrastructure fees and costs for inefficient use of assets and so-called dead capital are always too high and a significant expense for the state and organizations regardless of who manages it. The absence of that organizational structure or its shortcomings in an organization where physical assets make up a large share of the balance sheets can have negative economic consequences and is crucial from the perspective of ecology, health, and other safety in the execution of business operations – says Katičić.

At Combis, they have been introducing solutions for ‘asset’ management for years. Berislav Lastrić, the Technical Director of the System Support and Integration Sector, says that recently there has been a noticeable local increase in interest in asset management and a shift in focus towards it, both in IT and its processes as well as in the overall corporate ‘asset’ management related to the entire business. This change, he says, is primarily visible with the growth of process maturity within the organization.

– In this process, IT begins to fulfill its role as a business partner to other functions of the company and support for management, but also for the administration. Although the application of IT technologies and support for ‘facility’ management processes is somewhat more specific and the market offer is currently smaller, there is a clear applicability and need for the use of IT technologies in that segment as well – says Lastrić, who illustrates the difference between ‘asset’ and ‘facility’ management with an interesting example.

Revenues and Costs

‘Asset’ management, he explains, deals with assets within the business strategy and is focused on the priorities of investors. ‘Facility’ is focused on the end user and the individual, dealing with aligning asset management and business to improve productivity in the work environment. As good examples of the application of ‘asset’ and ‘facility’, he cites the real estate business in the financial sector. He explains that portfolio management of real estate will be addressed from the investor’s perspective, where the term ‘asset’ management is often used. At the same time, for the tenant, the manner and quality of the use of the property with all its aspects will be the application of ‘facility’ management services. Dražen Octenjak, Director of the Asset and Cash Management Sector at Erste&Steiermärkische Bank, says that this bank uses the services of an external partner for ‘facility’ management tasks. Some of the reasons include the large number of branches and their dislocation, as well as the expertise in various technical fields that employees of specialized companies have. If the bank were to decide to manage the assets itself, the costs of training and the number of its own employees would be significantly higher, which is also a reason why external collaborators are engaged. When it comes to ‘asset’ management, it is handled by the Asset and Cash Management Sector, and the organization is based on the interests of the Erste Group. ‘Asset’ management and ‘facility’ management are important from the perspective of cost management. Quality space management and its maintenance are necessary prerequisites for banking operations, where the basic premise is that investments and costs are carefully planned and controlled. A good example is the activation of dead capital. If properties are unused, they incur costs; if they are put into function, either by leasing or selling or using them for the operations of state companies, they generate income. However, it should be noted that it is not always rational to utilize a property.

– It is difficult to align needs with available properties. For example, a property that requires a large investment due to poor condition may be better sold than renovated because even a quality location can generate income – says Octenjak.

The knowledge and skills of these managers are certainly needed, and private companies will introduce them without problems if they do not already have them. Perhaps this story is much more important for the state, which inefficiently manages its assets, and perhaps for that reason it could invest in such personnel.