The Need for Enhanced Technology Risk Management Maturity
There is broad acceptance amongst enterprises today that the lack of a streamlined and holistic risk management framework impedes the maturity of their risk management processes. As a result, organizations are unable to control the frequency of risk events or minimize the damage from them.
The Three Lines of Defense Model
The Systems Thinking approach allows organizations to look at the interdependence between the components involved in each risk management process and how they can work together to enhance risk management maturity. The Three Lines of Defense model is a means to structure the roles and responsibilities for risk-related decision making and control to achieve effective risk governance, management, and assurance.
Involving extensive examination of external (political, economic, environmental), regulatory as well as internal factors, the model casts individual lines of business, the independent corporate risk function, and the internal audit function as the three lines of defense against all forms of business risk. Each line of defense needs to take measures to ensure enhanced risk management maturity of the enterprise. These measures can overcome existing challenges in achieving effective enterprise risk management; for example, currently, many business units are involved with risk management programs only to the extent of demonstrating compliance. Activating them as the first line of defense involves greater vigilance on their part, with a deeper awareness of organizational vulnerabilities.
Finally, the model can also be used to facilitate close collaboration among the three lines of defense, helping create a risk aware culture and make the enterprise risk-enabled.
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