When it comes to Governance, Risk, and Compliance (GRC), understanding the integrated risk management responsibilities for each internal and external stakeholder isn’t just a best practice. It’s a critical component to preparing for and defending against threats that can do serious harm to your organization.
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Frameworks and processes may help light the path towards a healthy risk management program. But it’s a common challenge to translate and reinforcing these practices to the risk stakeholders who carry them out daily.
Your line of business, risk and compliance professionals, and auditors all play a role in integrated risk management responsibilities. The IIA defines these specific roles as the three lines of defense. Each line is accountable for different duties across the organization and for GRC program collaboration. Despite their varying functions, the risk stakeholders who fall into each area must maintain clear and fluid collaboration and effective governance communication.
Integrated Risk Management Responsibilities: The Three Lines of Defense
The three lines of defense have been defined by a number of organizations, but initially, The Institute of Internal Auditors (IIA) established the three lines of defense model to help organizations create an assignment hierarchy for their teams to align, collaborate, and audit for risk – all to protect against and respond to it.
The First Line of Defense:
When it comes to integrated risk management responsibilities, the first line of defense falls to your organization’s business units. The line of business, or business unit, represents the functional aspects of your business. Security, marketing, customer service, sales, finance, production, and human resources are commonly defined business units recognized across industries.
These stakeholders are interacting and influencing risk factors daily. Because they are the first point of contact, they are the “first line of defense, front line, or more broadly referred to as the line of business. In an ideal scenario, these departments are responsible for and take ownership of, identifying, and managing risk. They should also be proactively mitigating risks that arise for full circle GRC program collaboration. Organizations should include these team members in any planning and development of new organizational policies because they deal with risk regularly.
The Second Line of Defense:
Your compliance and risk management teams represent the second line of defense in your integrated risk management responsibilities. Organizations that don’t have the resources for dedicated team members in one or both areas should set up a committee to manage the second line of defense duties. These stakeholders help define risk for the business, reinforce risk management strategies, and proactively check for gaps, adding a risk protection layer.
The second line is responsible for overseeing risk, and monitoring controls consistently. Measuring risk for overall compliance to ensure your organization is up to date with applicable laws, regulations, frameworks, and your general governance policies. Historically there was an emphasis on financial risks and reporting errors. However, it has evolved to encompass many risk domains, including IT Risk Management, Third-Party Risk Management, Operational Risk, Enterprise Risk, Privacy Compliance, and more.
The Third Line of Defense:
The third line of defense is your safeguard for assurance, evaluating, confirming, or providing corrective measures that practices are well executed and well designed. These stakeholders are your internal auditors. Their responsibility is to provide independent risk assurance for your controls. External audit teams further validate internal audit efforts for a variety of compliance obligations.
Guidance for audit teams and the separation of duties have evolved significantly since the original “three lines of defense model” was outlined. While independence and objectivity are still critical to fulfilling their role, guidance to involve audit sooner rather than after the fact has become generally encouraged to highlight corrective measures and optimization opportunities from the start. A significant part of their current and traditional role is to measure control effectiveness; how well is this practice executed? And measure control design, does this practice mitigate risk as intended? Often they measure your controls against recognized internal standards (corporate policies and guidance) as well as published frameworks and regulations (ISO, GDPR, OSHA, etc.) for internal auditing. Audit findings and summary reports are presented to leadership to report how the company is currently operating and how it can improve operations.
Auditors come to the table with an independent perspective – they do not need to be separated from the process altogether. Updated guidance and the modernization of the three lines of defense model recommend involving audit more continuously, including in the design and roll-out phase of key initiatives like automation. Incorporating your audit team sooner rather than only after processes are established will help fortify your GRC program collaboration and optimize operations.
Oversights and Leadership:
Finally, each line of defense will report up to senior management: CFO, CIO, CISO. While not involved directly in the three lines of defense or directly with GRC program collaboration, the leadership team plays a crucial role in executing your integrated risk management program. It’s this group’s job to make strategic decisions about risk. The leadership team sets the tone from the top to establish business objectives, company culture and help champion buy-in across the business for risk initiatives.
First Line of Defense: Timely Collaboration
Risk management best practices are transitioning from an old-school approach to a more modern one. Traditionally, risk management happened in a silo with second-line risk professionals. Second-line professionals completed point-in-time reporting manually, often fueled by compliance mandates – and resulting in – a narrow picture of risk exposure and business impact.
Now the digitization and subsequent speed of business today make that model outdated. Periodic assessments would be hopelessly irrelevant before they even reached the intended recipients, opening your organization up to unforeseen risks.
Register for the Webinar: Three Ways to Scale GRC | Working Across Your Lines of Defense
The Need for Speed and GRC Program Collaboration Across the Three Lines of Defense.
Working Through Digital Transformation and IoT
Alignment, communication, and collaboration are essential to coordinating the necessary, timely responses to risk. Data and analytics are more abundant than ever today. The data-driven landscape that businesses operate on today provides an accurate and fast understanding of your risks. But breaking down the natural silos that people gravitate to creates a significant lag in communicating and coordinating data points across their three lines of defense and various business units. Organizations will need to lean heavily on their first line of defense to collect this data in real-time.
As businesses continue to move faster and faster, transparent, and rapid communication to stakeholders across all three lines of defense is necessary. Otherwise, insights gathered will quickly become yesterday’s news and lose value to the organization. Without these regular updates, your risk management will have a series of gaps to protect your organization.
Because the results could potentially threaten your business’s existence, risk management today isn’t about a once-a-year-review of tactics to make sure you’re staying on the good side of regulators. It’s now about making it a consistent practice to make sure your business survives.
Use Technology to Power GRC Program Collaboration and Manage Your Lines of Defense
Making integrated risk management responsibilities work at your organization means getting all departments involved. You’ll see the benefits. Everyone will understand the centrality of risk management to your business strategy. They’ll also experience how essential it is as they apply it day-to-day.
If you’re not using the three lines of defense today, there’s a significant opportunity to be a change-maker at your organization. No matter what your responsibility as a risk stakeholder, start a conversation about transformation. Get data and analytics on your side to provide correlation, context, and value.
OneTrust GRC Platform is where you can get that data, and fast. It’s a suite of integrated risk management products you can use to identify, measure, mitigate, and report on risk across your three lines of defense. It brings your organization up-to-speed on risk management best practices and can manage all your integrated risk management responsibilities.
Further GRC Program Collaboration reading:
- Gartner Update: IRM 2021: The Year of Uncertainty and Change
- OneTrust GRC Blog: What are the Benefits of a GRC Management Tool?
- Read the blog: Common Problems with Using Spreadsheets for GRC Compliance
Next steps on GRC Program Collaboration:
- Watch the webinar: 10 Essential Steps to Rethinking Risk Assessments
- Watch the webinar: 3 Best Practices to Quantify Risk | Repeatable, Reliable, Reportable Insights
- Download the Whitepaper: Operationalize Your ISMS Program with OneTrust Software for Information Security