Nuban Institute

Three Lines of Asset and Risk Management for the Energy & Resources Industry

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The Energy & Resources Industry is an asset-intensive. Companies who manage these assets are often faced by regulatory compliance security and environmental threats and equipment that is old maintenance issues, as well as budget limitations. All of these issues can possibly have a significant impact on an organization’s internal as well as its external and strategic success.

A comprehensive risk management approach is vital to safeguard against these risks and ensuring that a company is able to meet the needs of its clients. This article provides a list of 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 includes the implementation of failsafe procedures that protect against reputational or financial damage from the failure of these partners. 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 offer.

Market risk is a potential decline in the value of a portfolio. Both asset managers and risk management are concerned about it, however from different perspectives. Portfolio managers manage their market exposures to limit unintentional bets on market conditions and other variables and risk management focuses on regulating crowded trades liquidity, leverage, expected volatility and cash flow.

A solid asset and risk management program is essential to preventing unexpected challenges and maximising the impact of the assets of an organization. The three-line governance framework is a potent tool to identify and reduce the risks that could impact the performance of an organization.

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