The Energy & Resources Industry is an asset-intensive. Organizations that manage these assets are typically confronted with compliance issues as well as environmental and safety risks, aging equipment, maintenance issues, and budgetary limits. These factors can have a significant impact on the external, operational and strategic success of an enterprise.
A well-rounded risk management strategy is critical to protecting against these threats and ensure that a business can continue to meet the demands of its customers. This article will highlight the key areas of risk and asset management:
Counterparty risk management is a technique that focuses on making sure key relationships, like prime brokers as well as counterparties to derivatives, clearing banks, and custodians are creditworthy. It also includes failsafe processes designed to guard against reputational or financial harm if these partners fail. This is done by vetting the vendors, and ensuring the approval process does not only apply to the vendor but as well to the service they provide.
Market risk is the possibility for a decrease in portfolio value and is a common challenge that asset managers as well as risk managers are concerned about but from slightly different perspectives. Managers of portfolios focus on managing their exposure to markets to limit unintentional market and factor bets, whereas risk managers attempt to manage overcrowded trades and leverage, and to monitor liquidity as well as cash flow.
A solid asset and risk management plan will enable an organization to avoid unexpected problems and maximize the value of its assets. The three-line governance framework is an effective instrument for identifying and minimizing the risks that could affect the performance of an organization.