The author argues that fiscal risks stemming from volatility in interest rates, exchange rates, commodity prices, and weather and geologic risks can be mitigated by transferring a portion of those risks to the market. Market risk transfer complements risk reduction measures (such as development of local capital markets and diversified production) and self-insurance, particularly in cases where balance sheet flows remain specifically exposed to market rates and movements, and when high cost, low-probability events present the risk of an economic or financial shock that cannot be absorbed internally. National risk management has tended to start with a focus on debt management and the need to evaluate and manage refinancing, interest rate, and currency risks. Recently, a number of countries-such as such as Mexico, Colombia, and Chile-have begun to take a more holistic view about sovereign risk management, now taking into consideration risks associated with commodity price shocks and natural disasters.