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

The Energy & Resources Industry is heavily dependent on assets. Organizations that manage these assets are typically confronted by compliance issues with regulatory requirements as well as environmental and safety risks as well as aging equipment, maintenance issues, and budget constraints. Each of these https://expertalmanagement.de/2021/12/29/risk-assessment-in-business/ aspects can 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 essential to guard against these risks and ensuring that a company is able to meet the needs of its clients. This article outlines the most important aspects of asset and risks 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 creditworthy and it 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 only to the vendor but also to the specific service they offer.

Market risk is the potential for a decrease in value of the portfolio, and it is a common issue that both asset managers and risk managers are concerned about but from slightly different perspectives. Portfolio managers manage their market exposures in order to minimize unintended bets on market conditions and other variables that affect risk management, while asset management focuses on tackling crowded trades, leverage, liquidity, expected volatility, and cash flow.

A well-designed risk and asset management program can aid an organization in avoiding unexpected problems and maximize the benefit of its assets. The three lines of defense governance framework is a successful method of identifying and reducing the risks that can impact an organization’s success.