The Energy & Resources industry is asset-intensive, and the organizations that manage them are often confronted by regulatory compliance, safety and environmental threats and older assets, maintenance issues, and budgetary limitations. Each of these aspects could have an impact on the external, operational, and strategic success of an organization.

A well-rounded risk management strategy is crucial to protect against these threats and ensure that a company can continue to meet the needs of its clients. This article outlines the most important aspects of risk and asset management:

Counterparty risk management is a method that focuses on ensuring that key relationships, such as prime brokers as well as counterparties to derivatives, clearing banks, and custodians, are creditworthy. It also includes failsafe procedures designed to guard against reputational and financial damage should these partners fail. This is accomplished by vetting vendors and ensuring that the approval process does not just apply to the vendor but as well to the service they provide.

Market risk is a potential decline in portfolio value. Asset managers as well as risk management are concerned about this, but from slightly differing perspectives. Portfolio managers are focused on managing their market exposures to limit unintended market or factor bets, whereas risk managers are attempting to manage crowded leverage and trades, as well as to be aware of the liquidity as well as cash flow.

A strong program for managing risk and assets is essential to preventing unexpected problems and maximising the impact of the assets of an organization. The three-line governance framework is a potent instrument for identifying and minimizing the risks that can affect an organization’s performance.