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Working paper

Improving the Management of the Crown’s Exposure to Risk

Issue date: 
Wednesday, 23 December 2009
View point: 
Publication category: 
JEL classification: 
G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
H11 - Structure, Scope, and Performance of Government

Formats and related files

The paper discusses the management of the New Zealand Crown's exposure to financial risk.


The paper discusses the management of the New Zealand Crown's exposure to financial risk. It argues that the Crown's aggregate exposure to risk can be effectively managed only centrally, and that, despite the difficulties of measuring risk and specifying an appropriate objective, the government should do more to measure, monitor, and control the Crown's aggregate exposure to risk. The paper goes on to present a new model for quantifying the Crown's exposure to risk, which integrates analysis of the government's accounting assets and liabilities with analysis of projected tax revenue and government spending. Among other results, the model suggests that the annual volatility (standard deviation) of the Crown's comprehensive balance sheet is at present approximately $30 billion.


The paper benefited from discussions with and comments from many colleagues at the Treasury including Jean-Pierre Andre, Matthew Bell, Peter Bushnell, Phil Combes, Alex Deans, Craig Fookes, David Galt, Aaron Gill, Tim Hampton, Nicola Haslam, Marcus Jackson, John Janssen, Tracy Mears, Brian McCulloch, Kamlesh Patel, Paul Rodway, Mark Sowden, Andrew Turner, Gerry Verhaart, and Ken Warren. The authors also wish to acknowledge the significant input from Paul Dyer. External review was provided by Pat Duignan. Responsibility for any errors or omissions strictly belongs to the authors.


The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the authors. They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.

Last updated: 
Thursday, 7 January 2010