A model that separates risk-taking in the business, independent risk oversight, and independent assurance by internal audit. It keeps those who take risk apart from those who check it.
Where you will meet it
Three lines of defence comes up in 8 learning outcome notes across the FRM syllabus.
A few of them:
The Governance of Risk Management FRM Part I · Foundations of risk management
“The three lines of defence assign ownership.”
Governance FRM Part II · Credit risk measurement and management
“The three lines of defense model divides the work.”
Risk Governance FRM Part II · Operational risk and resilience
“The three lines of defence divide operational risk responsibilities so that those who take risk are not the only ones judging it.”
Enterprise Risk Management and Future Trends FRM Part I · Foundations of risk management
“The three lines model is often used: business units own risk, the independent risk and compliance function oversees it, and internal audit gives independent assurance.”
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