What is Asset Valuation? – Risk Management Terminology
Asset valuation is a monetary value assigned to an asset for risk management purposes that are based on actual cost and non monetary expenses.
If an asset has no value, there is no need to provide protection for it.
A primary goal of asset valuation in risk management is to ensure cost effective safeguards are deployed. An example of this is that it would’t make sense to spend $50,000 protecting an asset that is only worth $500.
Placing a monetary value on specific assets can be difficult. Improperly assigning value to assets can result in failing to properly protect an asset or implementing financially infeasible safeguards. To help better assign monetary values to assets, below is a list of contributing factors that will help in determine the value:
- Purchase cost
- Development cost
- Administrative or management cost
- Maintenance or upkeep cost
- Cost in acquiring asset
- Cost to protect or sustain an asset
- Value to owners and users
- Value to competitors
- Intellectual property or equity value
- Market valuation
- Replacement cost
- Productivity enhancement or degradation
- Operational costs of asset presence and loss
- Liability of asset loss