The Energy & Resources industry is very resource-intensive and the companies that manage them are typically confronted with compliance issues, safety and environmental threats in addition to ageing assets, maintenance issues, and budgetary limits. All of these issues could have an impact on the external, operational and strategic success of an organization.
A well-rounded approach to managing risk is essential to guard against these risks and to ensure that businesses can keep meeting its customers’ demands. This article highlights the main areas of risk and asset management:
Counterparty risk management is a procedure that focuses on ensuring key relationships, like prime brokers and counterparties to derivatives clearing banks, and custodians are creditworthy. It also includes failsafe processes designed to guard against financial losses or reputational harm if the partners fail. This is done by vetting the vendors and ensuring that the approval process applies not just to the vendor but also to the specific service they offer.
Market risk could lead to a decline in the value of a portfolio. Asset managers as well as risk management are concerned about this, but from slightly different perspectives. Managers of portfolios focus on managing their market exposures to limit unintentional market and factor bets, whereas risk managers seek to manage their crowded trades and leverage, and to examine liquidity as well as cash flow.
A solid asset and risk management plan is essential to preventing unexpected issues and maximizing the value of the assets of an organization. The three look at this site lines of defense governance framework is a successful method of identifying and reducing the risks that can impact the success of an organization.