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N.Z. Treasurers Put Low Priority on Commodity Risk, Survey Says

New Zealand company treasurers put a low priority on the importance of commodity risk, with two-thirds saying they don’t manage that exposure, according to a survey by PricewaterhouseCoopers.

Commodity risk was the lowest ranked of eight treasury activities across the 95 companies surveyed, PWC said in an e-mailed report today. Working capital management and liquidity risk were the most important activities, the survey showed.

Agricultural commodities including milk and lumber make up 60 percent of New Zealand’s exports, while the nation imports most of its crude oil. Two-thirds of companies said they had significant exposure to commodities, led by oil, electricity and agricultural products, the survey showed.

“By enhancing their understanding and management of commodity risk, organizations can achieve greater stability in corporate earnings and improve the likelihood of meeting forecasts,” PWC said. “We expect commodity risk to become increasingly managed in New Zealand corporates the same way as other market risks.”

About 34 percent of firms said they managed their commodity risk, compared with 77 percent that protect themselves against currency fluctuations and 90 percent that take out interest-rate hedges, PWC said.

The survey showed 87 percent of respondents had an annual budget of less than NZ$500,000 ($410,000) for treasury operations, and two-thirds function with the equivalent of one full-time staff member.

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