Objective
To discuss aspects of the two previous sessions that were not fully covered and to look forward into 2023 and beyond.
Topics included:
- Perceived Problems in the 3LoD Model
- Process Controls and Systematic Controls Complexity
- Attracting and Retaining the Right Skills
- Value of Risk Controls
Perceived Problems in the 3LoD Model
Industry Context:
- The industry has adopted the model and has made its best attempt to segregate activities in line with the model.
- Regulation very clearly states banks need to have a first line, second line and third line of defence in place, and the regulation is prescriptive about the involvement of both Risk and Compliance.
- There have been efforts to improve communication lines and share assets between the lines of defence.
- Algo trading has implemented the 3LoD model more robustly than other businesses because of MiFID II and RTS 6 requirements.
Challenges:
- There is a perception that the rigidity of the 3LoD model has created some challenges when it is implemented by an organisation.
- There is some redundancy between the first and second line because the second line has a requirement to oversee and monitor the first line’s activities.
- A lot of time is being taken developing and increasing the level of confidence that the second line has in the first line.
- Executives are fatigued with multiple reports sent out from the various lines.
