What responsibilities does the governing body have in the Three Lines Model?

Conditions

• Sits above all three lines in the model.
• Responsible for strategic direction and oversight rather than day-to-day execution.

Reasoning, step by step

1. Identify the governing body as the top leadership or management team that makes decisions.
2. Understand that all three lines report to and receive direction from it.
3. List its specific risk-management responsibilities: establishing risk appetite, maintaining open communication about goals, and creating and managing an internal audit process.

Example

The presenter says: "All three lines of defense report to and receive direction from the governing body... In risk management, the governing body is responsible for establishing risk appetite, maintaining open communication about goals, and creating and managing an internal audit process."

Common misconceptions

• Thinking the governing body executes the daily risk management tasks.
• Assuming the governing body only receives reports but does not provide direction.

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