Three Lines of Asset and Risk Management for the Energy & Resources Industry
octubre 8, 2023
The Energy & Resources Industry is asset-intensive. Organizations that manage these assets are typically confronted with regulatory compliance as well as environmental and safety risks as well as aging equipment maintenance issues, as well as budgetary limitations. All of these factors can be a major influence on the organization’s operational external and strategic performance.
A well-rounded strategy for risk management is crucial to defend against these threats and to ensure that a business can remain in a position to meet the needs of customers. This article outlines the most important areas of risk and asset management:
Counterparty risk management focuses on ensuring that the relationships with key players (such as prime brokers and derivative counterparties, as well as clearing banks and custodians) are reliable and creditworthy, and that includes implementing safeguards that are failsafe to protect against reputational or financial harm caused by the failure of these partners. This is accomplished by vetting vendors and ensuring that the approval process extends not only to the vendor, but also to the specific service they offer.
Market risk could lead to a decline in portfolio value. Asset managers as well as risk management are worried about it, but from slightly differing perspectives. Portfolio managers manage their exposure to markets in order to minimize unintended bets on markets and factors, while risk management focuses on regulating crowded trades leverage, liquidity, expected volatility, and cash flow.
A strong program for managing risk and assets is essential to preventing unexpected challenges and maximizing the impact of an my site organization’s assets. The three lines of defense governance framework is an effective approach to identifying and reducing the risks that can impact the success of an organization.