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The Energy & Resources Industry is highly asset-intensive. Companies that manage these assets are typically confronted by compliance issues with regulatory requirements as well as environmental and safety risks and equipment that is old maintenance issues, and budgetary limits. These factors can have a significant impact on the operational, external and strategic performance of an enterprise.

A well-rounded risk management strategy is essential to guard against these risks and ensuring that a business can continue to meet the demands of its clients. This article highlights key areas of risk and asset management:

Counterparty risk management is focused on ensuring that important relationships (such as prime brokers and derivative counterparties, as well as clearing banks and custodians) are reliable and creditworthy, and includes the implementation of safeguards that are failsafe to protect against reputational or financial damage resulting from the failure of these partners. This is achieved through vetting vendors, and ensuring that the approval process does not only apply to the vendor, but also the service they provide.

Market risk is a potential decline in the value of a portfolio. Both asset managers and risk management are concerned about it, however from slightly different perspectives. Portfolio managers manage their market exposures to reduce unintentional betting on markets and other elements while risk management concentrates on regulating crowded trades leverage, liquidity, expected volatility, and cash flow.

A solid asset and risk management plan will help a company avoid unexpected challenges and maximize the value of its assets. The three-line governance framework is a potent instrument for identifying and minimizing the risks that could negatively impact an organization’s performance.