One of the roles of internal audit is to provide assurance on the effectiveness of risk management processes. Internal audit can contribute to the organization's risk assessment process by reviewing how key risks are identified, measured, monitored, and reported by the first and second lines of defense. Internal audit can also provide recommendations for improving the risk reporting process and ensuring that it aligns with the organization's objectives and risk appetite.
Additional Information:
- The first line of defense is the operational management, who owns and manages the risks.
- The second line of defense is the risk management and compliance functions, who oversee and support the risk management activities of the first line.
- The third line of defense is the internal audit function, who provides independent assurance on the effectiveness of risk management and internal control.
- Risk reporting is the process of communicating relevant and timely information about the organization's risks to the stakeholders, such as the board, senior management, regulators, and external auditors.
- The organization's risk appetite is the amount and type of risk that it is willing to accept in pursuit of its objectives.