Three Lines of Defence
Three Lines of Defence
Introduction
The Financial Crisis of 2008 and Subsequent Market Changes
The Business Case for Insurers to Adopt Operational Risk Management
Insurance: Its Products, Services and Business Operations
Insurers’ Operational Risk Governance and Framework
Internal Risk-Event Reporting
External Loss Data
Risk and Control Assessments
Risk Indicators
Reporting and Analysis
The Past, the Present and the Future of Operational Risk Modelling
The Insurance Landscape
Three Lines of Defence
Reputation(al) Risk
Conduct Risk
Conclusions
INTRODUCTION
Success for managing operational risk is dependent on an effective risk-governance model that suits the maturity level of the organisation. The risk-governance model, however, depends on the profound support of the board of directors and senior management of the organisation. The most traditional governance model for risk management is the concept of three lines of defence. This model is increasingly being used by various organisations in order to effectively manage risk. The three-lines-of-defence model takes into account diverse teams such as fraud investigators, risk specialists, quality inspectors, internal control analysts, compliance officers, internal auditors and frontline staff, all together forming part of the risk-and-control governance structure.
In this chapter, we will explore the three-lines-of-defence model and offer a framework that aims to provide comfort to the board of directors and business executives that risks and controls can be well managed through a collaborated effort by all functions within the organisation. We will review the three-lines-of-defence model in the context of an integrated control framework in addition to exploring each
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