Improving the implementation of 3LoD in the financial services industry

Improving the implementation of the 3LoD model in financial services requires careful planning and ongoing commitment from all stakeholders. In our first article, The Fundamentals, we explore what 3LoD is, and the importance of implementing the model. In the second part of this series, our experts discuss the Challenges of implementing 3LoD.

The following article provides practical strategies to implement 3LoD, and a case study.

Strategies to improve implementation

Improving the implementation of the 3LoD model in financial services requires a commitment to risk management at all levels of the organisation and a willingness to adapt and improve processes over time. Some strategies that can help improve implementation of the 3LoD model include:

  • Clearly define roles and responsibilities: It is critical that each line of defence avoids overlap or duplication of effort. Organisations must ensure coordination by establishing clear communication channels, holding regular meetings, and providing training in risk management and the 3LoD model. This can help avoid confusion and inefficiencies while also ensuring that risks are effectively managed.
  • Provide adequate resourcing: Successful implementation of the 3LoD model requires adequate resourcing for each line of defence, including the funding, personnel and training needed to carry out duties effectively. This will help ensure that the model functions as intended and that risks are managed effectively, which is critical for meeting regulatory and compliance obligations, as well as maintaining stakeholder and customer trust.
  • Foster a risk-aware culture: This is critical to the 3LoD model's success. Organisations can cultivate a risk-aware culture by providing risk management training and education, encouraging open communication, and recognising and rewarding good risk management practices.
  • Make the most of technology: Technology can be a valuable tool in supporting risk management and the 3LoD model. For example, data analytics can identify potential risks and monitor them in real-time, while artificial intelligence and machine learning can help automate risk assessment processes.
  • Monitor, review and adjust: The 3LoD model must be monitored and reviewed on a regular basis to ensure that it is effective in risk management. Organisations can establish key performance indicators (KPIs) to assess the effectiveness of each line of defence and, based on the results of these KPIs, adjust the model as needed.

By implementing these strategies, organisations can help to ensure that risks are effectively managed, and that regulatory and compliance obligations are met.

Case Study

BDO provides ongoing assurance support to an automotive client. Over the last few years, BDO worked with the client through the audit planning cycle and partnered with senior management to provide relevant resources at the right times to supplement their needs. In addition to this, BDO has been able to support more widely with advice and risk subject matter expertise support to help inform, shape, and create essential considerations for focus.

Outcomes delivered

To continually provide exceptional client service, BDO focused on the following areas:

  • Partnering approach to working with the Internal audit team
  • Worked as the controls report assurance provider to transition this work from another consulting firm as the external auditor
  • Conducted risk management training to Line 2 staff on how to implement a robust and comprehensive Risk & Control Self Assessment (RCSA) process
  • Ensuring a flexible resource model to maintain a cost-effective leverage model to fit within the company’s budget. Due to the flexibly, and the cost-effective solutions, BDO continues to provide the client ongoing co-sourcing and outsourcing support on different Internal Audit cycles.
  • Regular and open communication with internal Managers and Senior Management
  • Demonstrating detailed and transparent project management throughout the course of the engagements
  • Demonstrating commitment and dedication to meeting client deadlines
  • Supported Management in presenting results of the controls testing to the Board and received outstanding feedback on the engagement team.

How BDO can help

The 3LoD model is a powerful tool for enhancing business performance. For help in implementing the 3LoD model in your financial services business, contact us to talk with our specialised team.