What is the main purpose of the "three lines of defense" model in ORM?

The main purpose of the "three lines of defense" model in Operational Risk Management is to clarify roles and responsibilities in risk management. This framework is designed to ensure that risk is effectively managed across an organization by delineating clear responsibilities among different groups.

In this model, the first line of defense typically consists of operational management who are responsible for identifying and managing risks as part of their daily activities. The second line includes risk management and compliance functions that provide support and oversight, ensuring that risks are being managed according to established policies and procedures. The third line is often represented by internal audit, which provides independent assurance that the risk management processes are functioning effectively.

By defining these distinct roles and responsibilities, organizations can create a structured approach to risk management that enhances accountability and strengthens overall risk governance. This clarity helps in not only managing risks more effectively but also in fostering a culture of risk awareness throughout the organization.