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FRM Part II · FRM Exam Part II · Integrated Risk Management

In the three-lines model commonly used to describe risk governance, which responsibility belongs to the first line?

The first line owns and manages risks and controls in day-to-day business activities. Independent risk oversight and model validation sit in the second line, and independent assurance to the board comes from internal audit as the third line.

  1. AProviding independent assurance to the board on the effectiveness of controls
  2. BOwning and managing risks and controls in day-to-day business activitiesCorrect
  3. CSetting the firm-wide risk framework and independently monitoring limits
  4. DValidating the risk models used by the business

Explanation

The first line, the business units, owns and manages risk daily. Independent risk oversight and model validation are second-line functions, while independent assurance to the board is the third line (internal audit).

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