The Purpose of Risk Groups & Internal Audit: A Simple, Logical Accountability Model

Key Takeaways

• Clear Accountability Model: First line management owns and reports risk, risk groups support and integrate, and internal audit provides independent assurance.
• Purpose of Risk Groups: To enable and challenge first line management while aggregating and communicating risk information to senior leadership and the board.
• Purpose of Internal Audit: To verify the completeness and credibility of management’s risk reporting and identify gaps.
• Closed-Loop Governance: The model creates a system aligned with fiduciary duty by ensuring ownership, support, and assurance are logically distributed.

Deep Dive

In a recent social media post, I laid out what I see as the joint purpose of risk groups and internal audit. The response reinforced what I’ve long believed—that governance works best when accountability is simple, logical, and aligned with fiduciary duty.

For years, debates have raged over the respective roles of risk management groups and internal audit. Too often, both functions have drifted into vague mandates, overlapping responsibilities, and turf wars that confuse boards and management alike. What we need is not more complexity, but clarity.

If we take ISO’s definition of risk seriously (“the effect of uncertainty on objectives”) and apply basic accountability logic, the answer is refreshingly simple.

The Three Lines of Governance Logic

• First line management must own responsibility for identifying, assessing, and reporting risk (uncertainty). Why? Because they are directly accountable for delivering on the organization’s mission-critical objectives.
• Risk groups, whether under a CRO, ERM team, or other structure, cannot “own” risks. Their purpose is to help first line management do this job reliably and consistently. They are enablers, challengers, and integrators, not risk owners.
• Internal audit provides assurance. Its purpose is to independently verify whether management’s reporting on uncertainty is reliable, complete, and evidence-based, and to identify where gaps remain.

Together, these three roles form a closed-loop governance system. Management owns risk. Risk groups make sure the process is decision-useful. Internal audit tests credibility. The result? A governance model aligned with fiduciary duty and purpose-driven oversight.

When we distill this logic, the core purposes become clear:

• Purpose of Risk Groups: “To help first line management reliably identify, assess, and report uncertainty linked to mission-critical objectives, and to provide independent aggregation, analysis, and communication of this information to senior management and the board.”
• Purpose of Internal Audit: “To provide independent assurance to the board and senior management on whether management’s reporting of uncertainty linked to mission-critical objectives is reliable, complete, and supported by credible evidence and to highlight where gaps exist.”

This framing does more than tidy up job descriptions. It repositions risk groups as integrators and support mechanisms, while reinforcing internal audit’s essential role as an assurance provider.

Why Isn’t This the Norm?

If this logic feels obvious, the natural question is: why hasn’t it been adopted as the foundation for regulatory expectations, IIA standards, or risk institute guidance? The answer lies in history. Regulators have long mandated weak first line risk management and layered on second and third line requirements to fill the gap. That patchwork created inefficiencies, confusion, and misaligned incentives.

But shareholders and broader stakeholders deserve better. If regulators, IIA, or risk institutes disagree with this clear accountability model, they should explain why, because the logic is straightforward, and the benefits for governance are undeniable.

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