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Explanation:
Under the three lines of defense model in risk governance, the first line (business units) is responsible for taking and managing risks directly (Option A). The second line of defense (the independent risk management function) is responsible for establishing the risk management framework, which includes methods for identifying, measuring, monitoring, and controlling risks (Option B). The third line of defense (Internal Audit) provides independent assurance and reports directly to the board of directors (Option D). The second line does not oversee the third line (Option C); rather, the third line reviews the first and second lines.
Q.36 Which of the following is most likely a role and responsibility of the second line of defense for the overall risk management of a firm under risk governance?
A
Making decisions for managing risks.
B
Establishing risk management methods, and measurement methods.
C
Overseeing the risk management activities of the third line of defense.
D
Reports independently to the board of directors.
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