The Energy & Resources industry is highly asset-intensive, and the companies that manage them are typically confronted by regulatory compliance in the form of environmental, safety and safety concerns as well as aging assets, maintenance issues, and budget limitations. All of these factors can have a huge impact on the organization’s operational as well as its external and strategic success.
A comprehensive risk management strategy is essential to guard against these risks and ensuring that a company can continue to meet the demands of its customers. This article provides the major areas of risk and asset management:
Counterparty risk management is a technique that focuses on ensuring that key relationships, such as prime brokers and counterparties to derivatives clearing banks, and custodians, are creditworthy. It also has failsafe procedures that are that are designed to safeguard against financial losses or reputational damage if these partners fail. This is done by vetting suppliers and ensuring that the approval process is not only to the vendor, but also to the specific 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 different perspectives. Portfolio managers focus on managing their market exposures to reduce unintended market and factor bets, while risk managers are attempting to manage overcrowded trades and leverage, and to examine liquidity and cash flow.
A robust program for managing risk and assets is essential to preventing unexpected challenges and maximising the value of an organization’s assets. The three-line governance framework is a useful instrument for identifying and minimizing the risks that could impact the performance of an organization.