The Energy & Resources industry is highly asset-intensive, and the companies that manage them are often confronted by regulatory compliance in the form of environmental, safety and safety concerns in addition to aging assets, maintenance issues and budget restrictions. All of these factors could have a significant impact on the external, operational and strategic success of an enterprise.
A comprehensive approach to managing risk is essential to guard against these risks and to ensure that a company can continue to meet its customers’ demands. This article will highlight the key areas of asset and risk management:
Counterparty risk management focuses on ensuring that key relationships (such as prime brokers derivative counterparties, clearing banks and custodians) are creditworthy, and it involves implementing 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 is not just to the vendor but also to the particular service they offer.
Market risk is a potential decline in portfolio value. Asset managers as well as risk management are concerned about it, however from slightly differing perspectives. Portfolio managers manage their exposures to the market to reduce unintentional bets on markets and factors, while risk management focuses on managing crowded markets, liquidity, leverage, volatility and cash flow.
A strong program for managing risk and assets is essential to preventing unexpected issues and maximizing the value of the assets of an organization. The three lines of defense governance framework is a reliable method for identifying and reducing the risks that can affect the success of an organization.