Risk Element Considerations for Management and Boards, Part 3

A crucial element of an effective risk response strategy is establishing a broadly accepted understanding of who owns the risk. The executive team is not solely responsible for risk ownership, and to be truly successful at risk response, it’s imperative that all team members understand and embrace their roles in the process. 

The Three Lines of Defense model can be used to improve communication and clarify roles and responsibilities in the risk response process for all employees, from top to bottom. 

The three lines of defense are: 

1. Functions that own and manage risk
2. Functions that oversee risk
3. Functions that provide independent assurance 

The Three Lines of Defense model provides management with a more comprehensive view of how their teams control and respond to risk, resulting in the most effective risk management and improved decision making across the board. 

Read more in the Bankers Digest article, Risk Elements that Management Should Know and Boards Should be Asking, Part 3 by Weaver’s Bruce Zaret and Michael Winters, or visit part 1 and part 2 of this series for additional risk considerations.