The Energy & Resources Industry is heavily dependent on assets. Companies that manage these assets are typically confronted with regulatory compliance as well as environmental and safety risks in addition to aging equipment maintenance issues, and budget limitations. Each of these aspects can be a major influence on an organization’s internal successful external, strategic and internal success.

A comprehensive risk management plan is critical to protecting against these risks and ensuring that the company continues to meet the needs of its customers. This article outlines the most important aspects of risk and asset management:

Counterparty risk management focuses on ensuring that important relationships (such as prime brokers and derivative counterparties, as well as clearing banks and custodians) are reliable and creditworthy, and that includes implementing safe procedures to safeguard against reputational or financial damage from the failure of these partners. This is done by vetting the vendors and ensuring that the approval process is not just to the vendor but also to the particular service they provide.

Market risk could lead to a decline in portfolio value. Asset managers as well as risk management are concerned about it, but from slightly different perspectives. Portfolio managers manage their exposures to the market to reduce unintentional betting on markets and other elements that affect risk management, while asset management focuses on tackling crowded trades, liquidity, leverage, volatility, and cash flow.

A robust asset and risk management plan is essential to preventing unexpected challenges and maximizing the impact of an organization’s assets. The three lines of defense governance framework is a reliable approach to identifying and mitigating the risks that could impact an organization’s success.

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