There are five common signs that a financial institution might be purportedly “adopting” the three lines of defense, yet might not be living the three lines of defense in practice. If a financial services firm is exhibiting one or more of these signs, it may be time for an intervention at the C-suite or board level.
With sufficient clarity of thinking, management drive, and determined execution, the three lines of defense can be transformed from “words to live by” to a functional bulwark that can protect the business in good times and in bad. But to be truly effective, the model needs to evolve as the business evolves.
Mark Abrahamson, a London-based principal, and George Netherton, a London-based principal in Oliver Wyman’s Financial Services practice, on why the three lines of defense have a bad name.