Question

To assist in achieving risk management objectives, many banks & financial institutions in Australia have adopted ____ lines of defence:

Option 1: One
Option 2: Two
Option 3: Three
Option 4: Four

Answer 1

Banks & financial institutions in Australia typically adopt three lines of defiance to meet their risk management objectives, including operational management, risk compliance functions, and internal audit to assure effective control and risk mitigation.

Step-by-step explanation:

To assist in achieving risk management objectives, many banks & financial institutions in Australia have adopted three lines of defiance. These lines of defiance include operational management, risk management and compliance functions, and internal audit. The first line of defiance is operational management who are responsible for maintaining proper control over the day-to-day operations and managing risks. The second line is the risk management and compliance functions that establish frameworks to identify and mitigate risks, while the third line, internal audit, provides independent assurance that these controls and frameworks are effective and being followed. Such a multifaceted approach ensures that a bank can diversify its loans and maintain a balanced portfolio to protect against various financial risks, including loan defaults and asset-liability time mismatches.