The Energy & Resources Industry is heavily dependent on assets. Companies who manage these assets are typically confronted with regulatory compliance as well as environmental and safety risks, aging equipment, maintenance issues, and budgetary restrictions. These his explanation factors could possibly have a significant impact on the organization’s operational as well as its external and strategic success.
A well-rounded risk management strategy is critical to protecting against these risks and ensuring that a company can continue to meet the demands of its clients. This article will highlight the key areas of risk and asset management:
Counterparty risk management is a procedure which focuses on ensuring important relationships, such as prime brokers, counterparties to derivatives, clearing banks, and custodians, are creditworthy. It also has failsafe procedures that are that are designed to safeguard against reputational and financial harm if these partners fail. This is achieved by vetting vendors, and ensuring that the approval process does not only apply to the vendor but also the services they provide.
Market risk is the possibility for a decrease in the value of a portfolio, and it is a problem that both asset managers and risk managers are concerned about but from different perspectives. Portfolio managers manage their market exposures to reduce unintentional bets on the market and other factors that affect risk management, while asset management focuses on managing crowded trades, leverage, liquidity, expected volatility and cash flow.
A solid risk and asset management program can aid an organization in avoiding unexpected problems and maximize the benefit of its assets. The three-line governance framework is a potent instrument for identifying and minimizing the risks that could impact the performance of an organization.