In the three lines of defense (3LoD) model, 1LoD is within the “business” of a financial institution, which includes functions such as front-office trading, sales, human resources and marketing. According to the Basel Committee, this first line of defense is responsible for “identifying and managing the risks inherent in the products, activities, processes and systems for which it is accountable.” Key elements of the first line’s responsibilities include: identifying and assessing the materiality of operational risks; establishing appropriate controls to mitigate inherent operational risks; ensuring there are adequate resources, tools and training for the identification and assessment of operational risks; maintaining adherence to the organization’s operational risk appetite and tolerance statement; and monitoring and reporting on operational risk within business units, including residual risk, operational loss events, process and control inadequacies, and breaches of operational risk tolerances.

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