The Energy & Resources Industry is asset-intensive. Companies that manage these assets are often faced by regulatory compliance, safety and environment threats in addition to aging equipment maintenance issues, as well as budget limits. Each of these aspects can potentially have a large impact on an organization’s operational successful external, strategic and internal success.

A comprehensive strategy for managing risk is essential to safeguard against these risks and ensure that businesses can continue to meet the needs of customers. This article outlines the most important aspects of asset and risk management:

Counterparty risk management is a procedure that focuses on ensuring key relationships, including 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 if the partners fail. This is accomplished by vetting vendors and making sure that the approval process applies not just to the vendor, but also to the particular service they provide.

Market risk is the possibility for a decline in the value of a portfolio and is a problem that asset managers and risk managers deal with however from slightly different perspectives. Portfolio managers manage their market exposures in order to minimize unintended bets on market conditions and other variables, while risk management focuses on managing crowded trades, leverage, liquidity, expected volatility, and cash flow.

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

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