Three Lines of Asset and Risk Management for the Energy & Resources Industry

The Energy & Resources Industry is asset-intensive. Companies that manage these assets are often confronted by compliance issues with regulatory requirements environmental and safety threats in addition to aging equipment maintenance issues, as well as budgetary limitations. Each of these aspects could have a significant impact on the external, operational and strategic viability of an enterprise.

A comprehensive risk management strategy is critical to protecting more info here against these risks and ensuring that a business can continue to meet the demands of its customers. This article provides a list of the most important areas of asset and risk management:

Counterparty risk management focuses on ensuring that the relationships with key players (such as prime brokers and derivative counterparties, as well as clearing banks and custodians) are financially sound, and includes the implementation of safeguards that are failsafe to protect against reputational or financial harm caused by the failure of these partners. This is accomplished by vetting the vendors and ensuring that the approval process extends not only to the vendor but also to the particular service they offer.

Market risk is a potential decline in the value of a portfolio. Asset managers as well as risk management are concerned about this, but from slightly different perspectives. Portfolio managers manage their exposures to the market in order to minimize unintended bets on market conditions and other variables and risk management focuses on tackling crowded trades, liquidity, leverage, volatility and cash flow.

A solid asset and risk management plan will enable an organization to avoid unexpected challenges and maximize the use of its assets. The three lines of defense governance framework is a reliable approach to identifying and reducing the risks that could affect the success of an organization.