SAPA Conference Day 1 - Third Line of Defense

1. Who owns the risks?

The auditors

Operational Management

The compliance department

The enterprise risk management department

Operational Management owns the risks because they are responsible for identifying, assessing, and managing risks within the organization's day-to-day operations. They have the knowledge and expertise to understand the specific risks associated with their department or area of responsibility and are accountable for implementing measures to mitigate those risks. The auditors, compliance department, and enterprise risk management department may also play a role in risk management, but ultimately it is operational management that has the primary responsibility for owning and managing risks.

Explanation

Operational Management owns the risks because they are responsible for identifying, assessing, and managing risks within the organization's day-to-day operations. They have the knowledge and expertise to understand the specific risks associated with their department or area of responsibility and are accountable for implementing measures to mitigate those risks. The auditors, compliance department, and enterprise risk management department may also play a role in risk management, but ultimately it is operational management that has the primary responsibility for owning and managing risks.

2. The three lines of defense model distinguishes among three groups (or lines) as follows:

Functions that own and manage risks
Functions that oversee risks
Functions that provide independent assurance
Functions that provide risk mitigation services
Functions that deliver risks

I, II and IV

I, II and III

I, IV, and V

I, III, IV

The correct answer is I, II and III. The three lines of defense model distinguishes among three groups. The first line of defense is functions that own and manage risks. They are responsible for identifying, assessing, and managing risks within their area of responsibility. The second line of defense is functions that oversee risks. They provide guidance, support, and monitoring to ensure that risks are effectively managed. The third line of defense is functions that provide independent assurance. They conduct audits and reviews to assess the effectiveness of risk management processes and controls.

Explanation

The correct answer is I, II and III. The three lines of defense model distinguishes among three groups. The first line of defense is functions that own and manage risks. They are responsible for identifying, assessing, and managing risks within their area of responsibility. The second line of defense is functions that oversee risks. They provide guidance, support, and monitoring to ensure that risks are effectively managed. The third line of defense is functions that provide independent assurance. They conduct audits and reviews to assess the effectiveness of risk management processes and controls.

3. The responsibilities of the risk management and compliance functions are all of the following, EXCEPT:

Providing risk management frameworks

Providing the governing body and senior management with comprehensive assurance

Monitoring the adequacy and effectiveness of internal controls.

Facilitating and monitoring implementation of effective risk management practices

The responsibilities of the risk management and compliance functions include providing risk management frameworks, monitoring the adequacy and effectiveness of internal controls, and facilitating and monitoring implementation of effective risk management practices. However, providing the governing body and senior management with comprehensive assurance is not one of their responsibilities.

Explanation

The responsibilities of the risk management and compliance functions include providing risk management frameworks, monitoring the adequacy and effectiveness of internal controls, and facilitating and monitoring implementation of effective risk management practices. However, providing the governing body and senior management with comprehensive assurance is not one of their responsibilities.

4. Why is there a need for a second line of defense?

Because in the real world, a single line of defense is inadequate

To monitor the first line-of-defense control

To ensure that the first line of defense is properly designed, in place and operating as intended

All of the above

In the real world, relying on a single line of defense is not sufficient to protect against potential threats and risks. Having a second line of defense allows for additional monitoring and oversight of the first line-of-defense control. This helps to ensure that the initial control is properly designed, implemented, and functioning as intended. Therefore, all of the given options highlight the need for a second line of defense.

Explanation

In the real world, relying on a single line of defense is not sufficient to protect against potential threats and risks. Having a second line of defense allows for additional monitoring and oversight of the first line-of-defense control. This helps to ensure that the initial control is properly designed, implemented, and functioning as intended. Therefore, all of the given options highlight the need for a second line of defense.

5. Why is there a need for a third line of defense?

Because the first and second line are not to be trusted

To ensure that the auditors have a job in the organization

Because the high level of independence is not available in the second line of defense

To assist management in developing processes and controls to management risks

The correct answer is because the high level of independence is not available in the second line of defense. The third line of defense is necessary to provide an objective and independent assessment of the effectiveness of the organization's risk management and control processes. While the first line of defense consists of operational management responsible for managing risks, and the second line of defense consists of risk and compliance functions providing oversight and support, they may not have the same level of independence as the third line. Therefore, the third line of defense is needed to ensure an unbiased evaluation of the organization's risk management practices.

Explanation

The correct answer is because the high level of independence is not available in the second line of defense. The third line of defense is necessary to provide an objective and independent assessment of the effectiveness of the organization's risk management and control processes. While the first line of defense consists of operational management responsible for managing risks, and the second line of defense consists of risk and compliance functions providing oversight and support, they may not have the same level of independence as the third line. Therefore, the third line of defense is needed to ensure an unbiased evaluation of the organization's risk management practices.

Sapa Conference Day 1 - Third Line Of Defense