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Leading risk management with a great defense

September 11, 2018

Fully embracing the “Three Lines of Defense” model can help construction companies mitigate risk and optimize opportunities.

FMI Corporate Governance and Leadership

Risk can create a route to opportunity or failure, depending on how it is managed. Because the challenges that general contractors face are unpredictable and ever-changing, implementing an effective strategy to address risk can help pave the way to success.

Barry Franklin, Head of Risk for Zurich North America, explains how the “Three Lines of Defense” model, which has long been utilized by organizations around the world, can help optimize how engineering and construction businesses address their current and future risk scenarios.

This model provides a straightforward and effective way to ensure that risks are clearly identified, assessed, owned, managed and monitored by outlining roles and responsibilities within an organization. Here’s how it is structured:

  • First line of defense: Business management is responsible for their decisions and behaviors, as well as the subsequent outcomes of both.
  • Second line of defense: This two-pronged approach consists of the assurance functions of both risk management and compliance in helping business management understand and apply frameworks to support their responsibilities.
  • Third line of defense: An internal audit is conducted to ensure that the controls are operating effectively, including engagement between the first and second lines of defense.

Successful implementation of the “Three Lines of Defense” can result in fruitful conversations and collaboration among all stakeholders while optimizing opportunities today and in the years to come.

Learn more about the “Three Lines of Defense” model and effective risk mitigation approaches.

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