Enabling the 1st Line of Defense with Policy, Training & Issue Reporting

Like battling the multi-headed Hydra in Greek mythology, redundant, manual, and uncoordinated governance, risk management, and compliance (GRC) approaches are ineffective. As the Hydra grows more heads of regulation, legal matters, operational risks, and complexity, scattered departments of GRC responsibilities that do not work together become overwhelmed and exhausted and start losing the battle. This approach increases inefficiencies and the risk that serious matters go unnoticed. Redundant and inefficient processes lead to overwhelming complexity that slows the business, at a time when the business environment requires greater agility.

Successful GRC strategy in complex business environments requires layers of protection to ensure that the organization can “reliably achieve objectives [Governance] while addressing uncertainty [Risk Management] and act with integrity [Compliance].”[1] Any strategist, whether in games, sports, combat, or business, understands that layers of defense are critical to the protection of assets and achievement of objectives. Consider a castle in the Middle Ages in which there are layers of protection by moats, gates, outer walls, inner walls, with all sorts of offensive traps and triggers along the way. Organizations are modern castles that require layers of defense to protect the organization and allow it to reliably achieve strategic objectives.

The Three Lines of Defense model is the key model that enables organizations to organize and manage layers of GRC controls and responsibilities. The European Commission originally established it in 2006 as a voluntary audit directive within the European Union. Since this time, it has grown in popularity and is now a globally accepted framework for integrated GRC across lines of defense within organizations – from the front lines, to the back office of GRC, to the assurance and oversight roles. GRC 20/20 sees the Three Lines of Defense Model as critical to enable organizations to reliably achieve objectives while addressing uncertainty and act with integrity.

As the name suggests, the Three Lines of Defense model is comprised of three layers of GRC responsibility and accountability in organizations. These are:

  1. Business Operations.The front lines of the organization across operations and processes comprise the roles that make risk and control decisions every day. This represents the functions within departments and processes that ultimately own and manage risk and controls in the context of business activities. These roles need to be empowered to identify, assess, document, report, and respond to risks, issues, and controls in the organization. This first layer operates within the policies, controls, and tolerances defined by the next layer of defense, GRC professionals.
  2. GRC Professionals.The back office of GRC functions (e.g., risk management, corporate compliance, ethics, finance, health & safety, security, quality, legal, and internal control) are the roles that specify and define the boundaries of the organization that are established in policy, procedure, controls, and risk tolerances. These roles oversee, assess, monitor, and manage risk, compliance, and control activities in the context of business operations, transactions, and activities.
  3. Assurance Professionals.The third layer of defense is assurance professionals (e.g., internal audit, external audit) that provide thorough, objective, and independent assurance on business operations and controls. It is their primary responsibility to provide assurance to the Board of Directors and executives that the first and second lines of defense are operating within established boundaries and are providing complete and accurate information to management. This is accomplished through planning and executing audit engagements to support assurance needs.

While a lot of attention has been given to effective management of the second (risk and compliance managers) and third line (internal audit) of defense, not a lot has focused on how to effectively engage the first line of defense: the employees and managers in the front line of the organizations.

Front line employees are making risk and compliance decisions every day and can either protect or expose the organization to unwanted issues. Risk and compliance are not just about the back office of risk, compliance, and audit management but it is about the front office engagement and education of employees on what is acceptable and unacceptable and how to report issues.  While a lot of attention has been given to effective management of the second (risk and compliance managers) and third line (internal audit) of defence, not a lot has focused on how to effectively engage the first line of defence: the employees and managers in the front line of the organizations.

GRC 20/20 is presenting on a webinar on how to engage and enable the front lines of your organization through effective communication and training on policies and how to report issues and incidents in the organization.

Attendees will learn:

  • GRC in the context of the Three Lines of Defence Model
  • How the second and third line of defense depend on the first line to protect the organization
  • How to effectively communicate and train the first line of defence on policies
  • Methods for first line employees to identify and report issues and incidents
  • How technology can automate and enable the first line of defense
  • Driving efficiency, effectiveness and agility into all three lines of defense
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[1]This is the official definition of GRC that is found in the OCEG GRC Capability Model. www.OCEG.org

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