The Energy & Resources Industry is highly asset-intensive. Organizations that manage these assets are typically confronted with regulatory compliance, safety and environment threats as well as aging equipment, maintenance issues, and budget constraints. Each of these aspects could have a significant impact on the operational, external and strategic performance of an enterprise.

A comprehensive risk management plan is crucial to protect against these risks and ensuring that a business can continue to meet the needs of its clients. This article will highlight the key areas of asset and risks 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 financially sound, and includes the implementation of failsafe procedures that protect against reputational or financial damage caused by the insolvency of these partners. This is achieved through vetting vendors, and ensuring the approval process does not only apply to the vendor, but also the service they provide.

Market risk could be the reason for a decline in value of the portfolio, and it is a common challenge that both asset managers and risk managers are concerned about, but from slightly different perspectives. Portfolio managers manage their market exposures to limit unintentional bets on the market and other factors that affect risk management, while asset management focuses on managing crowded markets, liquidity, leverage, expected volatility and cash flow.

A solid asset and risk management plan is vital to avoid unexpected issues and maximizing the impact of the assets of an organization. The three-line governance framework is a useful instrument for identifying and minimizing the risks that could negatively impact the performance of an organization.

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