Best Practice for Control Functions within the 1st Line of Defence
The Dorchester, London
Post Event Report
For more information about the conference, you can download an abridged version of the post-conference report here.
Hundreds gather for the first 1LoD Summit
Front-office control functions may be still be in their infancy, but the hundreds of attendees at the inaugural 1LoD Summit in London demonstrated a strong consensus that, while progress is still much needed, the 1 LOD is already showing itself to be a critical function for controlling non-financial risks.
More than two hundred professionals across the three lines of defence — the financial industry standard structure for mitigating non-financial risks — descended on The Dorchester Hotel in London on November 16 for the first 1LoD Summit.
The 1LoD Summit is the first independent conference for the newly created control functions in the first line of defence — control functions initially employed by and located within the front office of the markets and investment banking divisions of investment banks and now adopted more broadly across financial services.
Gathering together highly distinguished speakers including the Financial Conduct Authority’s director of market oversight, Julia Hoggett and General Sir Peter Wall GCB CBE ADC Gen, former head of the British Army and co-founder and CEO of consultancy group Amicus, the 1LoD Summit also featured the heads of front office risk and control divisions, of some of the top investment banks and asset managers.
Surveys conducted during the confab showed that conference attendees overwhelmingly agreed
that the 1 LOD control functions are a committed step by firms to enhance risk control and control management in the first line (see polls) and that, in five years’ time, the primary role of in-business control functions will be to maintain the first-line control framework — showing that the model, while not yet ubiquitously used by banks, is likely around to stay. Some 72% of 122 respondents also said they believe the front-offices of their businesses view in-business control teams as helping them.
But defining the first line of defence and its responsibilities remains a challenge even within institutions employing the model, surveys and panel discussions revealed. 66.7% of respondents said the division of control responsibilities between first-line revenue generators, first-line control teams and second- line teams was only somewhat clear — illustrating the need for industry dialogue, as well as dialogue within firms. To boot, 73.4% of survey respondents said that control functions within the first line have been only ‘reasonably effective” at reducing risk, though a further 19.1% said they had been very effective.
Those issues were often at the heart of the debate at the 1LoD Summit, featuring more than 20 presentations, panel sessions and small group discussions, in just the first in what is planned to be a global network of conferences. The conference also attracted technology and consultancy firms, including lead sponsors Deloitte, Digital Reasoning and Nasdaq.
1LoD co-founder John Baskott said, “We anticipated an audience of between 70-100 people. But here we are today with 210 delegates registered from 53 different organisations.
“On the sell side we have delegates from the business control teams from across markets, banking, wealth, corporate, custody and card businesses.
“But we also have representation from second and third line functions, here to learn about and give their perspective on developments in the front office. There are also senior control leaders from both the buy-side and broker community, who are also starting or, in some cases, quite well down the road in building their own front-office control function.”
While three quarters of attendees came from front office positions, second line employees comprised another 17% of the crowd. By firm type, two-thirds of attendees hailed from financial institutions, while technology firms represented 14% and consultancies another 15%. Just more than half of attendees were directors at their companies; 25% were managing directors; and just less than 23% were vice presidents.