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

The Energy & Resources Industry is highly asset-intensive. Companies who manage these assets are often faced by regulatory compliance environmental and https://expertalmanagement.de/2022/06/21/expedite-an-ma-process-with-the-data-room-for-due-diligence safety threats in addition to aging equipment maintenance issues, and budget constraints. These factors could possibly have a significant impact on an organization’s internal, external and strategic success.

A well-rounded risk management strategy is essential to guard against these threats and ensure that the company continues to meet the needs of its clients. This article provides the major areas of asset and risk management:

Counterparty risk management is a process that focuses on making sure key relationships, such as prime brokers and counterparties to derivatives clearing banks, and custodians are creditworthy. It is also a part of failsafe methods that are designed to safeguard against reputational and financial damage if the partners fail. This is done by vetting the vendors, and ensuring the approval process doesn’t just apply to the vendor, but also the service they provide.

Market risk is the chance for a decrease in the value of a portfolio and is a common challenge that asset managers as well as risk managers have to deal with but from different perspectives. Portfolio managers manage their exposures to the market 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 asset and risk management plan will help a company avoid unexpected challenges and maximize the value of its assets. The three-line governance framework is an effective instrument for identifying and minimizing the risks that could negatively impact the performance of an organization.