The Three Lines of Defense: Back Office Professionals

Modern business is very dynamic and disrupted. The organization’s various functions must band together in order to effectively manage and contain the vast web of risk and compliance. From front-line employees to operational managers and back-office

Modern business is very dynamic and disrupted. The organization’s various functions must band together in order to effectively manage and contain the vast web of risk and compliance. From front-line employees to operational managers and back-office, GRC professionals to internal auditors, approaching GRC and IA related issues from an integrated, coordinated, and combined lens that breaks apart departmentalized and siloed processes is becoming increasingly critical for organizations to provide the necessary assurance and security to the enterprise as a whole.

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Without a cohesive, coordinated approach, limited risk and control resources may not be deployed effectively, and significant risks may not be identified or managed appropriately. In the worst cases, communications among the various risk and control groups may devolve to little more than an ongoing debate about whose job it is to accomplish specific tasks.

Third Line: Internal Audit

The third line of defense is provided by internal auditors. The function of this line is to provide assurance to the organizations and its senior managers. Internal audit functions gauge the effectiveness of the first and second line of defense and includes all the various elements of the organizations risk management architecture and infrastructure i.e., risk related reporting, risk identification, assessment etc. and assess the overall execution of organizational objectives.

In this distributed risk responsibility environment, with the unique perspective and expertise IA brings to the table, we see a great opportunity for IA to provide the much-needed, efficient and effective leadership, framework, and follow-through processes across the organization. With no operations responsibility, IA is ideally positioned to play a critical role in 3LD success without compromising its objectivity or independence.

This role includes the important and unique duty of providing the necessary assurance to the organization’s senior directors and executives on the overall effectiveness of the organization’s governance and risk management procedures. It is uniquely positioned to recommend improvements on these procedures, as well as provide advice on the implementation of said improvements. This influential role is the foundation of any effective corporate governance program and architecture.

Internal audit is often paired with aspects of the first and second line of defense, but it is important to be wary of any potential conflict of interest. Ensuring that the integrity of internal audit is protected plays a critical role in the overall continuity of the organization.

The implementation of the three lines of defense model is no guarantee of increased effectiveness and efficiency, and each subsequent line of defense needs to coordinate their efforts and work together as a cohesive whole in order to create the necessary conditions for the success of the model.

There is no magic, fix-all formula for building maturity in GRC and IA related processes but establishing and implementing a technology solution that integrates these core functions and breaks apart siloed processes to increase visibility and organizational awareness is imperative in moving towards more effective, efficient, and versatile risk and control management systems. When operational managers, risk managers, compliance professionals, and internal auditors coordinate and share data, your organization is better protected and ready to meet the organization's broader business goals and objectives.

 

 

 

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