identification and measurement the second fundamental of sound risk management relates to risk identification and measurement. timely and accurate information is the lifeblood of sound risk management. a good risk - management structure must encompass risks across the entire firm, gathering and processing information on an enterprise - wide basis in real time. in short, you cannot manage your risks if you do not know what they are. randall s. kroszner, 2008, " improving risk management in light of recent market events, " speech delivered at the global association of risk management professionals annual risk convention, new york, february 25. aggregating information across a large, diversified financial institution is not easy and should be done with appropriate care and with adequate resources for checking timeliness and veracity. the ssg report, for example, noted that some firms could not easily integrate market and counterparty risk positions across risks types, making it difficult for their executives to identify concentrations across the entire firm. aggregating information about risk exposures and the concentration of risks may not be as challenging at smaller institutions, but checking the timeliness and veracity of the data is important at institutions of all sizes. in other words, risk managers should live by the adage " trust but verify, " being careful not to rely on assessments or data from others without conducting proper due diligence. it is also worth noting that financial institutions should gather a wide range of relevant information before they see market troubles brewing. in other words, scrambling for information once turbulence sets in is not good practice. understanding a firm's true risk exposures requires examining not just risks on the balance sheet, but also off - balance - sheet risks that are sometimes more difficult to identify and often not so easy to quantify. latent risks from certain complex products and certain risky activities should be properly recognized, because they can manifest themselves when market turbulence sets in. as the ssg report indicates, some firms had a poor understanding of the risks inherent in certain complex products or failed to recognize that certain activities contained latent risks that could be manifest in unexpected concentrations of risk exposures when market turbulence arose. for example, we witnessed some lapses in credit risk identification and measurement when, as i noted, certain institutions underestimated the actual credit risk of subprime mortgages and the secondary or tertiary effects brought on by disruptions in subprime markets for their broader set of activities. stress testing and scenario analysis are of paramount importance, since they can reveal potential concentrations of

its own, with little prospect for self - correction. moving with maximum speed against this backdrop, policymakers at the federal reserve acted swiftly and unreservedly in an effort to break the damaging psychology that was taking hold. the series of policy actions announced over the past month – both conventional and unconventional – reflected a full recognition that the current shock is qualitatively different from the financial crisis of 2008, without a culprit other than the virus itself. unconstrained by a diagnosis of who was to blame – and considering the mounting downside risks – the speed and scale of the policy response was free to match the dimensions of the unfolding shock. i won ’ t review all of the actions that the fed has taken over the past month – they are well documented elsewhere – but i would like to note of the breadth of activity to stabilize the financial 1 / 4 bis central bankers'speeches system and to support the flow of credit, both within and outside banking system. to that end, i ’ ll describe a few of the lending and credit facilities that the new york fed is charged with standing up to supply credit for households, businesses, and state and local governments : commercial paper funding facility by the middle of march, unusually high funding needs and pullbacks by key lenders of short - term funds led to surging rates in the market for commercial paper, or short - term ious issued by businesses and municipalities. interest rates on longer - term commercial paper, in particular, rose to levels not seen since the financial crisis of 2008. many issuers were reportedly unable to place commercial paper with a term of longer than a week, leading to increased risk that companies would not be able to fund basic operational needs, such as meeting payrolls or financing inventories. with backing from the u. s. treasury, the federal reserve established the commercial paper funding facility as a funding vehicle that can purchase new issuance of commercial paper from highly rated businesses and municipalities, and certain issuers that were downgraded after the virus shock. by providing assurances to issuers and investors that retiring commercial paper can be replaced with new issuance, the facility will promote confidence in the market and support the flow of credit to businesses and municipalities. corporate credit facilities ( ccfs ) at the same time that short - term commercial paper markets were nearly frozen, so too were markets for longer - term corporate borrowing – at precisely the moment when companies most needed a financing buffer. borrowing rates for investment -