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Three Lines of Defense Approach Effective, But Needs Updating, Says CCH Sword Risk Expert
(RIVERWOODS, ILL., April 30, 2009) – CCH Sword has issued a white paper pointing out why and how the traditional three lines of defense approach to risk management needs to be updated. CCH Sword is a leading developer and supplier of operational risk control solutions to the global financial services sector and a part of CCH, a Wolters Kluwer business. CCH is a leading provider of tax, accounting and audit information, software and services (CCHGroup.com).
The traditional three lines of defense are: the business, or the daily running of the operation and the front-office; the continual monitoring of the business by risk and compliance specialists; and periodic checking of risk and compliance by audit.
CCH Sword Director Richard Pike authored the white paper: Strengthening the Three Lines of Defense (http://www.cch.com/Press/news/CCHWhitePaper_3lines.pdf). Pike says that while this basic structure is sound, the way that these three lines communicate with each other and the relationship between them needs to be overhauled due to a far greater number of risks and regulations and an ever-increasing level of complexity in business.
Pike notes that the complexity of risk has led to a multiplication of risk and compliance teams, often operating as largely independent “silos,” each one asking the rest of the business for information.
“This not only leads to inefficiency due to the duplication of effort, it can also lead to frustration from front office staff and subsequent disinclination to engage with risk management,” Pike says. Potentially more serious is that the same information may be interpreted differently by different risk teams.
Additional challenges include gathering all risk information in a consistent format and making sure that internal audit teams are truly adding value rather than repeating the work of risk and compliance teams.
Pike advocates increased use of technology to enhance communication between and among the three lines, engaging business managers in the mechanics of risk management, simplifying processes for risk managers and making the work of internal auditors quicker and more accurate.
“It is important to make everyone realize that risk is their priority,” Pike says.
Click here to access the white paper: Strengthening the Three Lines of Defense.
About the Author
Richard Pike has more than 15 years experience in risk management and treasury IT. He has analyzed, designed and managed the development of core treasury and risk management systems for large international financial institutions. He is a regular speaker and writer on risk management issues, and has been named one of the top 50 faces of operational risk by OpRisk & Compliance magazine.
About CCH Sword
CCH Sword, based in Dublin, Ireland, is a part of CCH, a Wolters Kluwer business. It serves over 3,000 users in Europe, North America and Asia Pacific, with enterprise risk management (ERM) software, governance, risk and compliance software and IT consulting services to provide corporations with a comprehensive view of operational risk in conjunction with audit activities. Established in 1995, CCH Sword became part of CCH, a Wolters Kluwer business in 2008 and was renamed from Ci3 to CCH Sword.
About CCH, a Wolters Kluwer business
CCH, a Wolters Kluwer business (CCHGroup.com) is a leading provider of tax, accounting and audit information, software and services. It has served tax, accounting and business professionals since 1913. Amo ng its market-leading products are The ProSystem fx® Office, CCH® TeamMate, CorpSystem®, CCH® IntelliConnect™, Accounting Research Manager® and the U.S. Master Tax Guide®. CCH is based in Riverwoods, Ill.
Wolters Kluwer is a leading global information services and publishing company. The company provides products and services for professionals in the health, tax, accounting, corporate, financial services, legal, and regulatory sectors. Wolters Kluwer had 2008 annual revenues of €3.4 billion, employs approximately 20,000 people worldwide, and maintains operations in over 35 countries across Europe, North America, Asia Pacific, and Latin America. Wolters Kluwer is headquartered in Amsterdam, the Netherlands. Its shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Visit www.wolterskluwer.com for information about our market positions, customers, brands, and organization.
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