Establishing a comprehensive risk and control framework.

“The Three Lines of Defense model in enterprise , Governance Risk and Compliance (GRC) sometimes referred to as ‘3LOD’, is a framework designed to structure the GRC process. It was developed by the Federation of European Risk Management Associations (FERMA) and the European Confederation of Institutes of Internal Auditing (ECIIA) in 2008-10 and has since been adopted as a best practice framework for GRC. “

Being in Control

For decades, organizations across the world have followed the ‘three lines of defense’ – the good governance structure to manage risks and preserve business value. This model operates with three constituents-

The first line of defense

The function that owns and manages risk and facilitates the setting up of controls to mitigate or avoid them. These controls are executed by various departments in their day-to-day operations which is why they are called the first line of defense.

The second line of defense

An independent control function, it monitors risk management, compliance, and effectiveness of controls. The objective is to keep the compliance and risk mitigation process upto date and timely.

The third line of defense

A function that provides independent audits to assess the effectiveness of the operational and monitoring lines of defense and offer suggestions for improvement where necessary.

This model was created to define responsibilities and roles across the three core lines and to split responsibility for risk management across three functions, with different levels of accountability. The past few years though, saw the efficacy and relevance of this model questioned with a series of unforeseen events, starting with the pandemic. The moment-to-moment changes in the risk landscape that followed demanded a more resilient approach to ensure business continuity. Future-proofing businesses now meant operational integration and greater alignment of functions across their three lines of defense through frequent communication and information sharing.

It also meant that the time had come for the model to go from tactical to strategic if it needed to stay actionable.

 

The First line of defense for better control.

The first line of defense- Those that own and manage risks.

In any organization, the First Line of Defense sets the standards for the entire risk mitigation process. This starts with the establishment of best practices and shared protocols, which are then adopted as the framework in consultation with the remaining Lines of Defense.

Collaboration for control is a promising way to drive an organization’s resilience forward. And building this system requires an effective bolstering of the first line of defense and changing its focus from compliance to one of risk and control.

Collaborating with teams across functions, the first line of defense can be used to set the tone for risk management and establish a framework to assess manage and mitigate risks in collaboration with other teams.

This includes:

• Identifying the compliance and regulatory requirements and spelling out how they should influence operational processes.
• Defining the risk appetite and justifying the spending on each specific risk.
• Creating a risk management identification process with risk inventory, assessment scorecards, and methodologies.
• Designing training programs and protocols that address compliance, and risk management across departments.

Business agility with control management

A comprehensive control framework makes it easy to identify, track and mitigate risks in real- time. The empowerment of the first line of defense can provide organizations with a robust but flexible framework for a sound risk management strategy to face the future confidently.

The line of defense model facilitates organizing and managing the layers of GRC controls and responsibilities and enable organizations to, “reliably achieve objectives [Governance] while addressing uncertainty [Risk Management] and act with Integrity [Compliance].” (source: www.OCEG.org)

EnGRC – Facing the future with certainty

An effective GRC program ensures that every part of the organization is aligned around the common business goals, actions, and controls to drive business success.

ENGRC is built to address Governance, Risk, and Compliance together since each of these 3 disciplines creates information of value to the other and together they impact the technologies,

people, and processes enterprise wide. Our integrated frameworks and user friendly features go hand in hand to make your GRC program effective and efficient.

Know more. https://www.3i-infotech.com/engrc/