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

The Energy & Resources industry is heavily dependent on assets, and the businesses who manage them are frequently confronted by regulatory compliance as well as environmental and safety threats in addition to old assets, maintenance issues, and budgetary limits. All of these factors could have an impact on the operational, external and strategic performance of an organization.

A comprehensive strategy for managing risk is essential to guard against these risks and to ensure that a company can keep meeting the needs of its customers. This article provides a list of the most important areas of risk and asset management:

Counterparty risk management is focused on ensuring that key relationships (such as prime brokers, derivative counterparties, clearing banks and custodians) are reliable and creditworthy, and that includes implementing failsafe procedures that protect against reputational and financial harm caused by the failure of these partners. This is done by vetting suppliers and ensuring that the process of approval extends not only to the vendor but also to the specific service they provide.

Market risk could be the reason for a decline in the value of a portfolio, and it is a problem that asset managers as well as risk managers have to deal with, but from slightly different perspectives. Portfolio managers focus on managing their market exposures to limit unintentional market and factor bets, while risk managers attempt to manage their crowded trades and leverage, and to keep track of liquidity and cash flow.

A solid program for managing risk and assets is vital to avoid unexpected issues and maximizing the value of the assets of an organization. The three-line governance framework is a powerful tool to identify and reduce the risks that could negatively impact an organization’s performance.

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