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FRM Part II · FRM Exam Part II · Risk Governance

At a mid-sized bank, the head of the trading desk's business unit appoints a risk coordinator who identifies operational risk events, maintains the unit's risk and control self-assessment, and implements remediation actions. Under the three lines of defense model, this coordinator's activities most appropriately belong to which line?

The coordinator sits in the first line. Business units own the risks they create and are responsible for identifying events, assessing controls and fixing weaknesses. Second-line functions oversee and challenge, and the third line gives independent assurance, so neither describes this embedded business role.

  1. AFirst line, because business units own and manage the risks they generateCorrect
  2. BSecond line, because anyone who identifies risk events performs an oversight role
  3. CThird line, because self-assessment is a form of assurance
  4. DOutside the model, because coordinators have no formal accountability

Explanation

In the three lines model, front-line business management owns and manages risk, including identifying events, assessing controls and remediating gaps. A coordinator embedded in the business supports this ownership. Treating it as second or third line confuses ownership with oversight or independent assurance.

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