The Energy & Resources industry is asset-intensive, and the organizations that manage them are typically confronted with compliance issues in the form of environmental, safety and safety concerns as well as ageing assets, maintenance issues, and budget limits. These factors can have an impact on the operational, external, and strategic success of an enterprise.
A comprehensive approach to managing risk is essential to safeguard against these risks and to ensure that a business can keep up with the needs 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, derivative counterparties, clearing banks and custodians) are creditworthy and that includes implementing safe procedures to safeguard against reputational or financial damage resulting from the failure of these partners. This is accomplished by vetting vendors and making sure that the process of approval extends not just to the vendor, but also to the particular service they offer.
Market risk is the possibility of a loss in the value of portfolios. Asset managers as well as risk management are concerned about it, however from slightly differing perspectives. Portfolio managers focus on managing their exposure to markets to minimize unintended market and factor bets, while risk managers try to manage overcrowded trades and leverage, and to be aware of the liquidity and cash flow.
A strong asset and risk management program is vital to avoid unexpected challenges and maximizing the impact of an organization’s assets. The three-line governance framework is a useful tool for identifying and minimizing the risks that can affect the performance of an organization.