Final answer:
The 3 Lines of Defense model is a concept used in risk management and internal control systems in businesses. It provides a framework for how different functions within a business can work together to mitigate risk and ensure compliance.
Step-by-step explanation:
The 3 Lines of Defense model is a concept used in risk management and internal control systems in businesses. It provides a framework for how different functions within a business can work together to mitigate risk and ensure compliance. The three lines of defense include:
- First Line of Defense: This includes the operational functions within a business that directly manage risk and implement controls. For example, this could include front-line employees, supervisors, and managers who are responsible for ensuring that processes are followed correctly.
- Second Line of Defense: This consists of the risk management, compliance, and internal audit functions that provide oversight and monitoring of the first line of defense. They help establish policies and procedures, conduct risk assessments, and ensure compliance with regulations.
- Third Line of Defense: This is the independent assurance function, typically provided by an external audit function or an internal audit department. Their role is to provide objective assessments of the effectiveness of risk management and control processes, and to report findings to management and stakeholders.
The 3 Lines of Defense model helps businesses establish a system of checks and balances to manage risk effectively and ensure compliance with regulations and best practices.