I expect we’ll see the value of cognitive diversity as firms tackle complex problems like a digital transformation from multiple perspectives. I expect we’ll see the value of agility that facilitates product innovation, reprioritization, constructive partnerships, or the successful integration of financial market specialists and technologists. Finally, I expect we’ll see the value of well-crafted incentives where employees are rewarded based on both “what” they do and “how” they do it. More broadly, I think firms with high levels of “cultural capital” will be more likely to successfully implement a digital transformation in a sustainable, prudent and responsible manner. 6 This is a central question for risk managers and supervisors because the evidence suggests that most large-scale transformations fail.7 Just like firms, investors and supervisors consider execution risk when assessing bank mergers, I expect more attention will focus on culture and the change management risks associated with innovation and digital transformation. In my view, the official sector can facilitate this transition. The 2018 guidance on responsible innovation related to anti-money laundering and terrorist financing is a good example.8 Supervisors can also press on the governance and change management framework to promote effective internal oversight. From our perspective, supervisors also need to be nimble and develop the necessary skills to assess innovation as firms transform. While a firm’s culture is not directly observable, I believe this will prove to be a critical part of any change initiative.

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.