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Glossary · ERM

Three Lines of Defense

A governance model separating operational management (first line), risk and compliance oversight (second line), and independent assurance (third line).

Full definition
This framework clarifies accountability by designating business units as risk owners, risk management and compliance functions as oversight, and internal audit as independent assurance. Each line has distinct responsibilities: the first identifies and manages risks daily, the second provides frameworks and monitors adherence, and the third offers objective evaluation. Financial institutions widely adopted this model after the 2008 crisis to strengthen controls. The model prevents conflicts of interest and ensures multiple checkpoints for risk identification and mitigation.
governanceinternal auditcomplianceorganizational structureaccountability

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