An important principle of Asia-Pacific Risk Management is to provide recommendations to clients supported by robust analysis, stress/scenario testing and financial model simulations to ensure hedging policies and strategies deliver to the financial performance outcomes anticipated.

Asia-Pacific Risk Management provides advice to New Zealand, Australian and Asian clients on their financial market risks through the use of quantitative risk modeling techniques, in particular, Earnings @ Risk, Net Interest Margin @ Risk, and Value @ Risk modeling. Risk modeling is tailored to our clients’ varied and particular needs.

The purpose of @ Risk modeling is to test entities unique risk exposures and position against alternative hedging policies, including the existing hedging policy, in order to prove up an optimum "multi-weather" hedging policy or strategy.

Asia-Pacific Risk Management’s modeling focuses on changes in profitability, cash flows and balance sheet values from an entity’s unique financial market risks. Quantitative risk modeling for clients supports our Treasury Policy and strategic risk management advice and is tailored to meet the requirements of our clients.  Our understanding and ongoing extensive practical interaction with the financial markets provides a pragmatic, not theoretical, outcome.

The models are particularly well suited to clients with significant direct/indirect exposures to foreign exchange, interest rates and traded commodities. Surrogates may also be found for non traded commodities. The statistical characteristics of these pricing variables are taken from historical prices, current market prices and the simulation of alternative realistic and shocked future financial market price scenarios. Although recognised approaches such as Monte Carlo simulation can be adopted these statistical approaches are not necessarily consistent with observed financial market behaviour.

Simulation models are used to project profitability for various client-determined scenarios based on the statistical modeling of price and volume variables. These simulation techniques dynamically alter hedging portfolios, can model linear and non-linear risks, to produce a comprehensive risk/reward profile of the entities profitability, cash flows and balance sheet values. They also model the extent to which the effects of different financial market risks offset each other, or add to the potential for adverse outcomes.


Our quantitative techniques are flexible in their application, and can be readily applied to quantify:

• Levels and likelihood of future cash-flows, profitability or balance sheet impacts implied by various policies and hedging strategies.  This has been useful in supporting or otherwise the approach to NZIFRS.
• Sensitivity of cash-flows, profitability or balance sheet to various parameters, and impact of various financial market movements and shocks to parameters.
• Effectiveness of different hedging policies and strategies.
• Model simulation and scenario stress testing allows our clients to tailor the trade off between earnings volatility against average earnings over a multi year period.

Our clients have said that the risk modeling techniques greatly improve their comprehension of the expected outcomes of current and alternative risk management hedging policies and strategies. Our clients have also found that our models have helped Boards and senior management to visualise ‘cause and effect’ scenarios when used in conjunction with their strategic plans and competitor analysis. This has successfully resulted in many of our clients observing a reduction of earnings volatility without compromising on consistent and acceptable earnings performance.