The Energy & Resources Industry is asset-intensive. Organizations that manage these assets are typically confronted by compliance issues with regulatory requirements, safety and environment threats, aging equipment, maintenance issues, and budgetary restrictions. These factors could be a major influence on an organization’s internal as well as its external and strategic success.

A comprehensive approach to risk management is essential to defend against these threats and ensure that businesses can remain in a position to meet the demands of its customers. This article provides the major areas of asset and risk management:

Counterparty risk management is focused on ensuring that the relationships with key players (such as prime brokers derivative counterparties, clearing banks and custodians) are financially sound, and it involves implementing safeguards that are failsafe to protect against financial loss or reputational damage resulting from the failure of those partners. This is achieved by vetting vendors, and ensuring that the approval process doesn’t just apply to the vendor but as well to the services they offer.

Market risk is a potential decrease in the value of your portfolio. Asset managers as well as risk management are concerned about it, but from slightly different perspectives. Managers of portfolios focus on managing their exposure to markets to minimize unintended market and factor bets, while risk managers try to manage their crowded leverage and trades, as well as to keep track of liquidity and cash flow.

A strong asset and risk management program is crucial to avoid unexpected challenges and maximising the value of an organization’s assets. The three lines of defense governance framework is a reliable method of identifying and reducing the risks that can impact the success of an organization.