Featured Insight

Establishing a First-Line Risk Driven Culture To Improve Your Risk

December 2022

The financial services industry is under intense pressure as the concentrated oversight of the markets and scrutiny from Washington lawmakers and regulators increases. The markets look for excellent risk management, protecting consumers and sound financial service practices, while the regulators’ focus remains on protecting consumers and sound financial service practices (i.e., no risk surprises!).

Best practice risk management must be strong at the macro level, but also must be robust at the execution level. The top risk practitioners start with a clear, well-communicated risk appetite position that addresses target market products and target market clients with a strong culture of ownership and escalation. For execution, the three lines of defense framework is commonly recognized as the “gold standard” in the financial services industry. Financial institutions have responded to the heightened risk and increased scrutiny by staffing up in all three lines of defense, with little to no focus on how these three lines effectively work together. Building an integrated  process that seamlessly links all three lines of defense will increase their effectiveness and reduce the risk of gaps allowing problems and surprises to occur.

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