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

The Energy & Resources Industry is highly asset-intensive. Organizations who manage these assets are frequently faced by regulatory compliance security and environmental threats and equipment that is old maintenance issues, as well as budgetary constraints. All of these issues could have a significant impact on the external, operational, and strategic success of an organization.

A comprehensive approach to managing risk is essential to defend against these threats and to ensure that businesses can keep meeting the needs of its customers. This article provides a list of the most important areas of asset and risks 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 includes the implementation of safe procedures to safeguard against reputational or financial damage caused by the insolvency of those partners. This is accomplished by vetting vendors and ensuring that the approval process doesn’t just apply to the vendor, but as well to the service they provide.

Market risk is the possibility of a loss in the value of portfolios. Asset managers as well as risk management are worried about it, but from slightly different perspectives. Portfolio managers manage their market exposures to reduce unintentional betting on markets and other elements that affect risk management, while asset management focuses on managing crowded trades, liquidity, leverage, expected volatility, and cash flow.

A well-designed risk and asset management program will help an organization avoid unexpected challenges and maximize the value of its assets. The three-line governance framework is a useful tool for identifying and minimizing the risks that could impact an organization’s performance.

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