In establishing an organisation-wide risk governance structure, ESR adopts the ‘four lines of defence’ model. This governance model aims to drive risk accountability and ownership at all levels of the organisation, at the same time maintaining the right level of commitment and segregation across stakeholders. people processes systems 4th Line of Defence: Board Oversight 3rd Line of Defence: Independent Assurance Internal/External Audit 2nd Line of Defence: Management and Assurance Risk Management Compliance 1st Line of Defence: Business Governance/Policy Management Operational Governance Financial Governance Policy Management Four Lines of Defence 1st Line of Defence: Business Governance/ Policy Management Processes, systems and risk owners constitute the first line of defence. Risk management should be embedded in day-to-day operations and governed by relevant Group-wide policies and procedures that can manage risks to an acceptable residual level for the achievement of the business objectives. 2nd Line of Defence: Management and Assurance This line of defence comprises of risk management and compliance related functions within the Group. The main role of these functions is to ensure risk management and compliance related frameworks are well defined and consistently applied across the organisation. 3rd Line of Defence: Independence Assurance Functions in this line of defence primarily provide independent assurance over the effectiveness of risk management and internal controls and recommends changes or improvements in response to different business and control environments. 4th Line of Defence: Board Oversight The last line of defence against risks in any organisation is the Board of Directors. The Board, supported by the Audit Committee, is overall responsible for the governance and oversight of risk management and internal control systems within the Group to safeguard the interests of the Company and its shareholders as a whole. RISK MANAGEMENT R E A C H I N G N E W H E I G H T S 60 CORPORATE GOVERNANCE
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