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Fortifying Your Business: The Three Lines Efficiently Aligned With Shared Technology 
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Fortifying Your Business: The Three Lines Efficiently Aligned With Shared Technology 

In the realm of risk management, safeguarding your company against potential threats is vital for long-term success and sustainability. To achieve this goal, organizations deploy a robust governance framework known as the Three Lines . This framework outlines the roles and responsibilities of various stakeholders within the organization, who work together in order to mitigate risks and enhance the resilience of the company.

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We believe that significant efficiencies can be obtained when these Three Lines are more aligned. Essentially, while each Line may have a different risk opinion from the others, they are all connected to the same universe objects, which are a reflection of the organization (processes, systems, third parties etc.).

The First Line: Operational Controls 

At the forefront of risk management lies the first line, which consists of frontline employees and operational managers. They are responsible for mitigating operations risks by executing operational controls. These controls are rooted within the day-to-day business processes and activities. From implementing robust internal controls to holding standard operating procedures, the first line plays a key role in managing company risks effectively. Companies should empower frontline employees to take ownership of risk management. This enhances accountability and responsiveness to emerging threats for the company, which in turn, help fortify the overall business operations. 

The Second Line: Risk Management 

Serving as a critical intermediary between frontline operations and senior management, the second line is responsible for overseeing and coordinating risk management activities across the organization. For example, the obligations for this line include developing risk management policies, conducting risk assessments, and monitoring compliance based on regulatory requirements. The second line allows for independent supervision and guidance. The implementation of this method helps ensure that risk management practices are aligned with strategic objectives and the industry’s best practices. Finally, the second line serves as a catalyst for continuous improvement, driving enhancements to risk management processes and controls. By integrating this consistent and constant method, it helps the company adapt to evolving threats, as well as growing opportunities

The Third Line: Internal Audit 

Completing the triad is the internal audit function. Internal audit is originally tasked with providing independent assurance and evaluation of both risk management processes and internal controls (i.e.: the risk management. With the help of thorough audits and reviews, internal auditors assess if the system of risk management is sufficient. They do this by identifying control weaknesses, and then recommend corrective actions. By offering an objective perspective on the company’s risk management performance, the internal audit helps senior management and the board of directors make informed decisions and hold stakeholders accountable. As a result, internal audit effectively sparks organizational learning and improvement based on the findings and recommendations for the risk management system. It can be derived from the purpose of continuous internal auditing, that it fosters a culture of conscious improvement of risk management processes within the company. 

Collaboration with Three Lines 

Operating units are gathering an increasing amount of risk-related data over time. Although the Lines’ independence must be preserved, it is preferable to use the same structured and unstructured data as analysis input. First line officers, for instance, will conduct controls effectiveness tests; however, third line auditors, who may draw a different conclusion, can use the results immediately. First line officers need to be able to see the feedback from these auditors at the control level. In the CERRIX GRC platform, we support all Lines in their daily work. Eventually, all Lines will benefit from applying naming conventions, use of one risk taxonomy, sharing outcomes of assessments, tests and audits and make use of one data and document repository. Surely, board executives will be pleased with more aligned reports.  

With CERRIX, and the help of our consultants and partners, your company will be able to implement and accordingly utilise the Three Lines framework aimed at achievement of efficiencies and further collaboration.

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