Understanding 3LoD: What You Need To Know

In the past, organizations only relied on experience and some internal audit functions to identify weaknesses that could make the company vulnerable to unnecessary risks. Aside from the auditor, there was no real line of defense against various dangers that could negatively affect the organization. The introduction of 3LoD and multi factor authentication changed the game.

3LoD stands for three lines of defense. As the name suggests, it is a risk management model consisting of three levels. It aims to promote a better and stronger risk management culture. At the same time, the framework helps eliminate inefficiencies, overlaps, or gaps.

Understanding the 3LoD And Multi Factor Authentication

The idea of using multiple protection is a practical solution. It offers safer and more secure interactions and transactions. It can be seen in real-life applications, such as the use of multi factor authentication for payments and such.

The application of the 3LoD may vary depending on the organization. However, the concept behind it does not change. Here are the main characteristics of the three defenses:

Line #1: Risk Owners or Risk Takers

The first line of defense (1LoD) refers to the ones executing control. These include the frontline staff members and the operational management team. The 1LoD implements systems crucial in managing risks related to operations and non-financial functions.

Line #2:  Risk Oversight or Risk Guardians

The second line of defense (2LoD) covers the risk management and compliance functions of an organization. That means these are the members of the organization that monitors risk, such as the back office. They provide the necessary support, tools, and even advice to help the 1LoD in risk identification, management, multi factor authentication and monitoring.

Line # 3: Independent Risk Assurance

The third line of defense (3LoD) is from the internal audit function. It ensures that the 1LoD and 2LoD are effective and that both the risk management framework and internal control function are working.

A strong 3LoD framework has helped many organizations prepare for risks, manage them based on priority, and prevent huge losses.

That said, the changing market poses new challenges. Better utilization is necessary for better security.

In the financial sector, for example, the focus is now more on operational resilience. Prioritizing this aspect has become prevalent among financial services regulators, especially with the COVID-19 pandemic. Aside from considering their vulnerabilities and ensuring cyber security, reducing friction is also a must.

Nok Nok Products’ solutions, such as biometrics and multi factor authentication, can help. You can enhance your organization’s security and reduce friction at the same time. Thus, strengthening your line of defenses and allowing you to have good risk management strategies.

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