Network security is becoming a very sensitive and important topic for equipment manufacturers and network operators. In transparent optical networks, security is even more complex since the optical signals are not regenerated as in opaque networks and, therefore, the faults and attacks at the physical layer are more difficult to detect and isolate without significantly affecting the overall network performance. In this paper we define Failure Management as the prevention, detection, and reaction against failures. Failures are defined as the interruptions of the normal functioning of the network and comprise faults (accidental interruptions) as well as attacks (intentional interruptions which can be performed by service disruption or eavesdropping). Our work deals with a solution to detection of failures in transparent networks. For this purpose we have extended a Fault Location algorithm developed for opaque optical networks to be used in transparent networks and be able to also locate attacks. The proposed algorithm is called Transparent Failure Location Algorithm (TFLA). The first part of the extension is based on the study of other optical network elements such as Optical Add/Drop Multiplexers (OADMs), Optical Cross-Connects (OXCs), wavelength converters, Optical Line Terminators, etc. The vulnerability of these elements depends on their architecture and/or fabrication technology and, therefore, different attacks can be considered. A classification of these components based on the masking and alarming properties is proposed. The second part of the extension is based on the monitoring equipment that may be available in transparent networks. The TFLA was applied for the case of a transparent ring of the Pan-European network.