Typically 10% of a corporations’ assets are idle and or surplus. This means that millions of dollars of capital investments—in facilities, equipment and technology of all kinds—are at the end of their primary useful life. Changing market conditions, new manufacturing processes, corporate restructuring and new technology create idle assets that, without astute management, become financial liabilities and put pressure on the bottom-line. The pace of advancements in technology continues to accelerate this process. The more company profits are squeezed, the more successful corporations focus on recouping asset investments.

 

The decision options that companies face in managing these assets fall, in general, into three broad categories: (1) re-deployment/re-use, (2) selling or (3) disposal/discarding. Each one of these has it’s own set of critical issues that must be considered and planned for and managed carefully. Investment Recovery (IR) Professionals are charged with the challenging responsibility of managing the rocky landscape of surplus assets to maximize value and reduce risk and liability for the company in final disposition. In addition to requiring an incredibly diverse range of knowledge, to be successful, IR professionals need qualified service providers and resources in a wide variety of business channels to assist them in their efforts.

 
As important as it is for IR managers to know and have resources, it is equally important that service providers and other resources have insight into how and why corporate surplus asset disposition decisions are made. Enter The Investment Recovery Association 25 years ago, companies were addressing investment recovery as a very ad hoc, informal discipline. A few enlightened professionals recognized the need for a formal approach to investment recovery as a contributor to company bottom-lines and formed an organization to foster knowledge, identify and promulgate best practices in the field. In most cases these were people who were in the corporate management ranks in engineering, plant operations, procurement, purchasing, distribution and transportation—given the task of handling investment recovery as a part of their other job responsibilities. One of the first priorities this group recognized was the need to define and codify the decision considerations and processes essential to being effective in this area. With the leadership of the Investment Recovery Association, these principles have matured into the concepts represented in the following charts:
 

Decision Sequence to Maximize Recovery Potential and The Value Chain.

In addition, recognizing that the corporate managers needed a range of external resources, services and options to facilitate  and actualize their disposition decisions, after a few years of operation, the Association opened up it’s membership and invited members from services and specialty business areas that typically would be involved in surplus asset disposition.
 
Surplus equipment and material dealers & brokers, auctioneers,demolition and dismantling project contractors, appraisers, recycling and environmental specialists, technology surplus specialists, surplus marketing consultants and project contractors, hazardous material handling specialists, retail inventory brokers – and more, are now counted among the Investment Recovery Association membership. Each of the elements in the illustrated process progressions has it’s own set of detailed considerations for success, or Best Practices. In developing professional standards in any field, benchmarks, measurement and best practices are the cornerstone of how the profession impacts, contributes to and is perceived by the business community. If results are not measured, performance cannot be calibrated or improved, and the foundation for learning, development and business impact improvement is tenuous. In investment recovery, benefit-to-cost ratio compared to horizontal peers is key to performance evaluation.
 
The Value Chain.
The Investment Recovery Association recently released to its membership the profession’s Best Practices. These Best Practices are developed by aggregating benchmark data that’s accumulated every three years and interviewing the companies with the most successful programs. The Investment Recovery Association will be collecting 2006 benchmark data in the spring of 2007. The Benchmark Study and Best Practices are some of the most important benefits the Association provides Members on both sides of the business table—corporate managers and service providers.
 

Reprinted from ASSET 2.0, the Investment Recovery Business Journal, Vol. 5, 2006

© The Investment Recovery Association