reserves can be part of a sovereign disaster or contingent liability fund, which may be in foreign currency and in liquid and easy-to-convert assets. Depending on the size of those contingent liabilities, the government can also maintain a contingent liability fund, ideally with limited liability, so that there is a limit to government support (Cohen 2002).

Because governments rarely hold any form of reserves or provisions to cover probable losses that stem from these liabilities, the literature recommends using standard risk management methodologies to calculate appropriate provisions in the annual budgets and develop reserves or sovereign funds with uncorrelated risk (Lewis and Mody 1998; Currie and Velandia 2000). Our insights extend this view of fiscal risk management for governments by providing basic insights on how governments can create dashboards to track the fiscal risk of SOEs using the Z” SOE score to prevent problems. Our measures of fiscal risk can be used to improve the value at risk for the SOE portfolios of governments as well. It can thus help governments estimate the provisions they need to deal with SOE risk and reduce the unexpected need for fiscal injections (and of provisions) by improving ex ante monitoring.

# **References**

- Altman, E. I. 2000. “Predicting Financial Distress of Companies: Revisiting the Z-Score and Zeta Models.” _Journal of Finance_ 43: 1427–1459.

- ———. 2013. “Predicting Financial Distress of Companies: Revisiting the Z-Score and ZETA® Models.” In _Handbook of Research Methods and Applications in Empirical Finance_ , <mark>ed. Adrian R. Bell, Chris Brooks, and Marcel Prokopczuk, 4</mark> 28–456. Cheltenham, United Kindgom: Edward Elgar Publishing.

- ———. 2018. “Applications of Distress Prediction Models: What Have We Learned after 50 Years from the Z-Score Models?” _International Journal of Financial Studies_ 6(3): 70.

- <mark>Baum, Anja, Paulo A. Medas, Mouhamadou Sy, and Alberto Soler. 2020. "Managing Fiscal Risks from State-Owned Enterprises."</mark> _<mark>IMF Working Paper</mark>_ <mark>No. 20/213, available at SSRN 3744680 (2020).</mark>

- Bova, E., M. Ruiz-Arranz, F. G. Toscani, and H. E. Ture. 2019. “The Impact of Contingent Liability Realizations on Public Finances.” _International Tax and Public Finance_ 26(2): 381–417.

- Cebotari, A., J. M. Davis, L. Lusinyan, A. Mati, P. Mauro, M. Petrie, and R. Velloso. 2009. “Fiscal Risks: Sources, Disclosure, and Management.” _Departmental Papers_ 2009(001).

- Cohen, D. 2002. “Fiscal Sustainability and a Contingency Trust Fund.” _Government at Risk: Contingent Liabilities and Fiscal Risk_ , ed. H. Polackova Brixi and A. Schick, 143–157. Washington, DC: World Bank.

- Currie, E., and A. Velandia. 2000. “Risk Management of Contingent Liabilities within a Sovereign AssetLiability Framework.” In _XII Seminario Regional De Política Fiscal: Compendio de Documentos 2000-P_ , 307–333. Santiago, Chile: CEPAL ( <mark>Economic Commission for Latin America and the Caribbean)</mark> .

- De Janvry, A., A. Del Valle, and E. Sadoulet. 2016. _Insuring Growth: The Impact of Disaster Funds on Economic Reconstruction in Mexico_ . World Bank, Washington, DC.

- Foster, V., S. Witte, S. G. Banerjee, and A. Moreno. 2017. _Charting the Diffusion of Power Sector Reforms across the Developing World_ . World Bank, Washington, DC.

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