Scenario: A manufacturing firm consults with its suppliers to identify risks related to

supply chain disruptions and material shortages.

Which risk identification technique is illustrated here?

Which of the following statements about preventive and detective risk identification

techniques is most accurate?

A company wants to anticipate the impact of various hypothetical situations, such

as economic downturns or regulatory changes. Which risk identification technique

should they use?

2. Which risk identification technique is most appropriate for uncovering risks by

analyzing past incidents and trends?

1. Which of the following best describes the primary objective of risk identification in

the ERM process?

Case Study: Implementing the Three Lines of Defense in a BFSI Organization

Background:

ABC Bank is a leading financial institution operating in the BFSI sector, offering banking,

insurance, and asset management services. With increasing regulatory requirements and

evolving risks, ABC Bank decided to strengthen its risk management framework by adopting

the Three Lines of Defense (LoD) model.

Implementation:

 First Line of Defense:

Operational managers and front-line staff at ABC Bank were trained to identify,

assess, and manage risks in their daily activities. For example, tellers and

relationship managers were made responsible for detecting suspicious transactions

and adhering to anti-money laundering (AML) procedures.

 Second Line of Defense:

The Risk and Compliance department developed new policies and conducted regular

risk assessments. They monitored compliance with regulations such as KYC (Know

Your Customer) and GDPR, providing guidance and support to operational teams.

They also organized training sessions to raise awareness about emerging risks like

cyber threats.

 Third Line of Defense:

The Internal Audit team performed independent reviews of both operational and risk

management activities. They evaluated the effectiveness of internal controls,

checked adherence to policies, and reported findings to senior management and the

board. Their audits uncovered gaps in the AML process, leading to improvements in

monitoring and reporting.

Outcome:

By clearly defining roles and responsibilities across the three lines, ABC Bank improved its 

risk management, enhanced accountability, and ensured compliance with regulatory

standards. The model fostered a culture of transparency and proactive risk management.

How can the Second Line of Defense support the First Line in managing new regulatory

requirements or emerging risks?

Why is independent assurance from the Third Line of Defense important for senior

management and the board?

Case Study: Implementing the Three Lines of Defense in a BFSI Organization

Background:

ABC Bank is a leading financial institution operating in the BFSI sector, offering banking,

insurance, and asset management services. With increasing regulatory requirements and

evolving risks, ABC Bank decided to strengthen its risk management framework by adopting

the Three Lines of Defense (LoD) model.

Implementation:

 First Line of Defense:

Operational managers and front-line staff at ABC Bank were trained to identify,

assess, and manage risks in their daily activities. For example, tellers and

relationship managers were made responsible for detecting suspicious transactions

and adhering to anti-money laundering (AML) procedures.

 Second Line of Defense:

The Risk and Compliance department developed new policies and conducted regular

risk assessments. They monitored compliance with regulations such as KYC (Know

Your Customer) and GDPR, providing guidance and support to operational teams.

They also organized training sessions to raise awareness about emerging risks like

cyber threats.

 Third Line of Defense:

The Internal Audit team performed independent reviews of both operational and risk

management activities. They evaluated the effectiveness of internal controls,

checked adherence to policies, and reported findings to senior management and the

board. Their audits uncovered gaps in the AML process, leading to improvements in

monitoring and reporting.

Outcome:

By clearly defining roles and responsibilities across the three lines, ABC Bank improved its

risk management, enhanced accountability, and ensured compliance with regulatory

standards. The model fostered a culture of transparency and proactive risk management.

Give an example of how the First Line of Defense can identify and respond to an

emerging risk in a BFSI organization.