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

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.