Integrating risk management and governance through combined assurance

Facing mounting scrutiny and demands in the areas of risk management and governance, a growing number of organizations are adopting combined assurance to streamline their various assurance activities. Chandana Yagnavajjala from ECOVIS Al Sabti outlines how combined assurance can help, and what its implementation path looks like.

Effective risk management is crucial for organizations to navigate the complexities of business environment. As companies face an array of risks, from operational challenges to regulatory compliance, ensuring that these risks are appropriately managed and controlled is essential for long-term success.

The Three Lines of Defense

The Three Lines of Defense model has emerged as a widely recognized framework for structuring and enhancing risk management and governance practices. It outlines three distinct layers of responsibility for managing risks and controls.

First Line of Defense | Management
The first line consists of management and operational staff who directly own and manage risks within their areas of responsibility. They identify, assess, and control risks through day-to-day operations. This line is responsible for implementing and maintaining effective internal controls to mitigate risks.

Second Line of Defense | Risk Management & Compliance
The second line includes specialized functions such as risk management, compliance, and other control functions that oversee and support the first line. They set policies, establish frameworks, and perform oversight activities to ensure compliance with regulations and internal policies.

Third Line of Defense | Internal Audit
The third line is the internal audit function, which provides independent and objective assurance on the effectiveness of the organization's risk management, control, and governance processes. Internal audit evaluates and reports on how well the first and second lines are managing risks. This line offers an unbiased assessment of the organization's overall risk management and control environment.

Challenges Arising from Multiple Assurance Providers

While the Three Lines of Defense model is an effective framework to manage risk and ensure effective governance, when multiple assurance providers operate independently within an organization, some problems may arise, impacting the effectiveness and efficiency of the overall risk management and governance processes.

Challenges include: Gaps in Assurance Coverage; Redundancy in Control Testing & Duplication of Efforts; Conflicting Recommendations; and Complexity in Reporting.

The Need for Combined Assurance

As the scope of assurance activities expands, the need for a more integrated and coordinated approach has become increasingly apparent. A comprehensive approach to governance, risk management, and control has led to the evolution of combined assurance. Combined assurance ensures a strategic alignment of various assurance functions within an organization, aimed at providing a more comprehensive and cohesive assessment of risk, controls, and governance, by fostering collaboration with various stakeholders.

Combined assurance is a coordinated approach that integrates the efforts of various assurance providers within an organization (i.e., internal audit, risk management, compliance etc) to provide a unified view of the organization’s risk landscape. Combined assurance not only improves the overall efficiency of assurance activities but also strengthens the organization’s ability to achieve its strategic goals in a controlled and sustainable manner.

Key benefits of combined assurance include comprehensive risk coverage, the use of a unified risk taxonomy, a unified approach for the assurance map and risk register, more efficient resource utilization, and enhanced reporting.

The Implementation

Implementing requires a thoughtful approach to integrating various assurance activities, fostering collaboration among different functions, and continuously monitoring and refining the process to ensure its effectiveness. To navigate these challenges effectively, it is crucial to have a robust assurance framework that integrates and optimizes various assurance activities.

At ECOVIS Al Sabti, we offer specialized services to implement and enhance combined assurance approaches, ensuring that risk management and governance processes are both comprehensive and efficient. We help our clients streamline assurance activities, reduce duplication, and provide a cohesive view of their risk landscape.