to address this risk? some policy makers have argued that public disclosure of information could help reduce the risk of future systemic financial crisis, by preventing the buildup of " excessive " leverage or concentrations of risk. the principal focus of attention, as in the immediate wake of the failure of long term capital management, has been on two quite different types of public disclosure. the first is information that would make it easier to evaluate the overall leverage or risk profile of major hedge funds and their counterparties, and thereby judge their vulnerability to a sharp movement in asset prices. the second is information about the actual positions of individual funds or institutions : information that would make it easier to identify concentrated exposures to specific risk factors, and thereby assess more accurately the potential impact of the failure of a major fund or institutions on the market as a whole. these pose very different challenges and offer different benefits. there are a number of crude measures of overall risk profile that, if disclosed to the market, would give counterparties information they do not now typically get about the risk of failure of the fund. one example is data on the size of daily variations in net asset value, var, or profit and loss over the previous quarter. this type of information would not reveal proprietary information about trading strategies or otherwise create substantial disincentives to risk taking. although these would provide some information on the overall risk profile of the fund, they would be lagging indicators, and they would carry the usual risk of providing false comfort in some circumstances and excessive concern in others. adopting such measures would give the institutions that provide financing and leverage to hedge funds a somewhat greater capacity to judge their direct risk to those funds. but that is not their principal challenge. the institutions already know the positions they are financing, and they can use the usual range of tools to measure the potential exposure, net of collateral, in those positions. and where they do not feel they have adequate information to evaluate the overall risk profile of the fund, they can manage that risk by taking less exposure, by requiring more margin, or by building a greater cushion of protection against overall risk. so the potential gains from a disclosure regime of this type would be limited, at least as compared with the cost of trying to put such a regime in place on the global scale that would be necessary to make it effective. by far the greater challenge is to assess the potential impact of the failure of a major hedge fund on the firm's other exposures and other counterparties. this is

sarah dahlgren : the importance of addressing cybersecurity risks in the financial sector remarks by ms sarah dahlgren, executive vice president of the financial institution supervision group of the federal reserve bank of new york, at the oprisk north america annual conference, new york city, 24 march 2015. * * * introduction i would like to thank operational risk & regulation for inviting me to speak here today. i appreciate the opportunity to address this group and kick off what looks like a very interesting and comprehensive few days of dialogue around current and future risks facing the industry. as always, my remarks today reflect my own views and not necessarily those of the federal reserve bank of new york or the federal reserve system. i will begin my remarks with a high - level overview of the progress made in recent years in addressing some of the most significant risks facing the industry following the financial crisis. i will then go on to discuss one of the areas where i see some of the biggest challenges in the road ahead. as the industry continues to adapt to and implement necessary regulatory changes, it is also adapting to and leveraging technology changes : technology changes that offer both exciting opportunities and more complex risks than – i think – we are prepared for. progress coming out of the financial crisis, we all knew that we needed to be better prepared for future crisis events, whatever their character, source or timing. we needed financial firms, and a financial system, that was better prepared to weather all storms. in 2011, we developed the framework for supervision – a framework designed to ensure we had firms and a system that were less complex, more resilient and better managed. collectively, we have made a lot of progress since 2011 – and the industry is in much better condition relative to the pre - crisis period. but, as you all know, business does not stand still and this constant evolution results in new risks and new challenges. before turning to one of the biggest risks or challenges i see, i want to pause and recognize two things : • first, it ’ s clear that progress has been made across the industry in a number of areas – particularly in making firms and the system more resilient through improvements in capital and liquidity, as well as enhancements in risk management, including capital planning and stress testing across the range of risks firms face. but, in the remaining two areas of the framework – less complex and better managed – i think it ’ s safe to say that despite the fact that firms are addressing a number