Risk management formations - an alternative approach to the 3 lines of defense model

Clive Martin (), Paul Willman (), Roy Boukens () and Oliver Rockley ()
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Clive Martin: EY, Postal: 1 More London Place, London, SE1 2AF, http://www.ey.com
Paul Willman: London School of Economics, Postal: Department of Management, London School of Economics, London WC2A 2AE, http://www.lse.ac.uk
Roy Boukens: EY, Postal: De Kleetlaan 2, 1831 Diegem (Brussels), Belgium, http://www.ey.com
Oliver Rockley: EY, Postal: 1 More London Place, London, SE1 2AF, http://www.ey.com

Journal of Financial Perspectives, 2014, vol. 2, issue 3, 137-145

Abstract: Many firms use the “3 lines of defense” (3LOD) model to clarify responsibility for risk management but this approach has limitations, as three distinct “lines” do not always enable sufficient clarity, mindsets formed through deployment in one business can be difficult to break when considering another and simplistic and inaccurate generalizations can be made about those in each LOD. In the complex environment of financial services,there is increasing discontent with the 3LOD model. This article explains a new way of describing risk management responsibility and how it can be used to optimize alignment and address “red flag” formations that can occur.

Keywords: three lines of defense; three lines of defence; risk governance; accountability; risk management formations; alternative to three lines of defense; alternative to 3 lines of defense; risk responsibility; risk governance in financial services (search for similar items in EconPapers)
JEL-codes: G20 G21 G22 G23 G30 G34 G38 L22 (search for similar items in EconPapers)
Date: 2014
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