Technological progress, innovation, and new models of competition are changing the financial industry and there will undoubtedly be winners and losers. Understanding all of the factors that drive successful transformations will be a critical insight for both risk managers and supervisors. Conclusions 3/4  BIS central bankers' speeches  The financial sector is large, complex and constantly evolving due to a wide range of technological, business, and macro factors. Your job, and ours, is to be vigilant and open-minded in our thinking, constantly questioning our traditional assumptions and scanning the horizon to understand how the risk landscape is changing. The topics covered at today’s conference are some of the most important risks that the industry faces. Climate change and digital transformation are two powerful trends with the potential to fundamentally change financial services. We all need to be forward-looking and proactive in order to promote our ultimate goal of a safe and sound financial system that supports the sustainable provision of financial services and economic growth. Thank you for your attention. 1 NOAA National Centers for Environmental Information (NCEI), Billion-Dollar Weather and Climate Disasters  (2019), National Oceanic and Atmospheric Administration. 2 The Impact of Higher Temperature on Economic Growth, Riccardo Colacito, Bridget Hoffmann, Toan Phan and  Tim Sablik, Economic Brief, August 2018, No. 18–08; Climate Change and the Federal Reserve, Glenn Rudebusch, FRBSF Economic Letter, 2019–19, March 25 2019; Fourth National Climate Assessment, Volume II: Impacts, Risks and Adaptation in the United States, U.S. Global Change Research Program.

Before proceeding, I will emphasize that I am speaking for myself and these views do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System. Climate The U.S. economy has experienced more than $ billion in direct losses over the last five years due to climate and weather-related events.1 In addition, climate change has significant consequences for the U.S. economy and financial sector through slowing productivity growth, asset revaluations and sectoral reallocations of business activity.2 For these climate-related risks, a new lexicon has emerged. Physical risk is the potential for losses as climate-related changes disrupt business operations, destroy capital and interrupt economic activity. Transition risk is the potential for losses resulting from a shift toward a lowercarbon economy as policy, consumer sentiment and technological innovations impact the value of certain assets and liabilities. These effects will be felt across business sectors and asset classes, and on the strategies, operations and balance sheets of financial firms. Risk managers must be aware of these risks and develop the tools needed to identify, monitor and manage them appropriately. Physical and transition risks may manifest through traditional risk stripes such as credit, market, operational, legal and reputational risk, but today’s tools are not necessarily well-suited for the unique challenges associated with climate change. Let me mention three of these challenges. First, climate change is a long-term issue where actions today are likely to have an impact over many decades.