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

The Energy & Resources Industry is highly asset-intensive. Organizations who manage these assets are often confronted by compliance issues with regulatory requirements environmental and safety threats, aging equipment maintenance issues, as well as budgetary limitations. These factors can have an impact on the operational, external, and strategic success of an enterprise.

A comprehensive strategy for risk management is vital to defend against these threats and ensure that a business can keep up with the needs of customers. This article outlines the most important areas of risk and asset management:

Counterparty risk management focuses on ensuring that key relationships (such as prime brokers and derivative counterparties, as well as clearing banks and custodians) are creditworthy and it includes implementing safeguards that are failsafe to protect against financial loss or reputational damage caused by the insolvency of those partners. This is accomplished by vetting vendors and ensuring the approval process does not just apply to the vendor but as well to the services they offer.

Market risk is the possibility for a decrease in value of the portfolio, and it is a problem that asset managers and risk managers are concerned with however from slightly different perspectives. Portfolio managers manage their market exposures to reduce unintentional betting on markets and other elements while risk management concentrates on managing crowded trades, leverage, liquidity, expected volatility and cash flow.

A robust program for managing risk and assets is essential to preventing unexpected problems and maximising the impact of the assets of an organization. The three lines of defense governance framework is an effective approach to identifying and official site mitigating the risks that can affect an organization’s success.

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