From the course: Introduction to Risk Management

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Three lines of defense

Three lines of defense

From the course: Introduction to Risk Management

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Three lines of defense

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- Ask any chief risk officer about how their bank organizes itself to protect it against risk, they will all respond, "The Three Lines of Defense." Companies across many industries use the "Three Lines of Defense" model. It was developed as an internal audit model to help describe the relationship between frontline business units, the risk management function, and the internal audit function itself. The first line of defense is the bank employees who are involved in creating and selling products and services or operationally supporting customers, products and services. They are the risk owners. They are responsible for identifying and managing risk as part of their accountability for achieving objectives. Collectively, they should have the necessary knowledge, skills, information, and authority to operate the relevant policies and procedures of risk control. The second line of defense is the risk management function within the bank. They provide the policies, frameworks, tools…

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