The Energy & Resources industry is highly asset-intensive, and the companies who manage them are frequently confronted with compliance issues in the form of environmental, safety and safety concerns as well as ageing assets, maintenance issues, and budgetary restrictions. All of these issues could have a significant impact on the operational, external and strategic performance of an enterprise.
A comprehensive risk management plan is essential to guard against these threats and ensure that the company continues to meet the needs of its clients. This article highlights key areas of asset and risk management:
Counterparty risk management is focused on ensuring that the relationships with key players (such as prime brokers and derivative counterparties, as well as clearing banks and custodians) are reliable and creditworthy, and that includes implementing safe procedures to safeguard against reputational and financial damage caused by the insolvency of these partners. This is accomplished by vetting suppliers and ensuring that the process of approval extends not just to the vendor, but also to the specific service they offer.
Market risk is the possibility for a decrease in portfolio value and is a frequent issue that both asset managers and risk managers deal with, but from slightly different perspectives. Portfolio managers manage their exposure to markets to reduce unintentional betting on markets and other elements while risk management concentrates on managing crowded markets, liquidity, leverage, expected volatility and cash flow.
A solid program for managing risk and assets is essential to preventing unexpected challenges and maximising the impact of the assets of an organization. The three lines of defense governance framework is a successful method for identifying and reducing the risks that can affect the success of an organization.