provide more quantitative and qualitative information to the market and other stakeholders, but also help the market assess the quality of the risk oversight and make an informed judgment about the appropriateness of the organization ’ s risk appetite and its strategic direction. i would ask firms to answer the following questions about their public disclosures : do investors have the information they need to accurately evaluate the financial position of the firm and the risks it takes? in addition to quantitative information, does the disclosure provide qualitative input as to the purpose of the transactions and how they reflect the risk appetite and strategic direction of the firm? is the information provided in a manner that facilitates accurate assessments by investors? disclosure is not a one - size - fits - all proposition. instead, disclosure should be tailored to the activities and risks of the company and should tell the firm ’ s “ story. ” better disclosure also reduces the legal and reputational risks that accompany market “ surprises, ” as we have seen from recent experience. working with risk managers and accountants, the legal profession is well positioned to help large corporations strike the correct tone and balance in their disclosures to the marketplace. conclusion the movement from an entity - or function - based approach to an enterprise - wide paradigm appears inevitable given the increasing complexity of corporations and the interrelatedness of business lines and their risks. legal analysis, supervisory oversight, and firms ’ internal risk management and control systems likewise need to adopt an enterprise - wide focus. enterprise - wide risk management provides a framework for achieving and maintaining this focus by establishing a common risk management language within the organization and by facilitating a framework for improved disclosure.

), https : / / www. federalreserve. gov / newsevents / speech / brainard20170428a. htm. executive office of the president, preparing for the future of artificial intelligence. u. s. department of the treasury, a financial system that creates economic opportunities. board of governors of the federal reserve system, “ guidance on model risk management, ” supervision and regulation letter sr letter 11 - 7 ( april 4, 2011 ), https : / / www. federalreserve. gov / supervisionreg / srletters / sr1107. htm. see also andrew burt, “ leave a. i. alone, ” new york times, january 4, 2018, https : / / www. nytimes. com / 2018 / 01 / 04 / opinion / leave - artificial - intelligence. html. - 6with compensating controls. similarly, when our own examiners evaluate model risk, they generally begin with an evaluation of the processes firms have for developing and reviewing models, as well as the response to any shortcomings in a model or the ability to review it. importantly, the guidance recognizes that not all aspects of a model may be fully transparent, as with proprietary vendor models, for instance. banks can use such models, but the guidance highlights the importance of using other tools to cabin or otherwise mitigate the risk of an unexplained or opaque model. risks may be offset by mitigating external controls like “ circuitbreakers ” or other mechanisms. and importantly, models should always be interpreted in context. second, our guidance on vendor risk management ( sr 13 - 19 / ca 13 - 21 ), along with the prudential regulators ’ guidance on technology service providers, highlights considerations firms should weigh when outsourcing business functions or activities - - and could be expected to apply as well to ai - based tools or services that are externally sourced. 15 the vast majority of the banks that we supervise will have to rely on the expertise, data, and off - the - shelf ai tools of nonbank vendors to take advantage of ai - powered processes. whether these tools are chatbots, antimoney - laundering / know your customer compliance products, or new credit evaluation tools, it seems likely that they would be classified as services to the bank. the vendor risk - management guidance discusses best practices for supervised firms regarding due diligence, selection, and contracting processes in selecting an