Key risk indicators (KRIs) are an important tool within risk management and are used to enhance the monitoring and mitigation of risks and facilitate risk reporting. Operational risk profiles using risk indicators should be continually monitored, dynamic, and updated as often as new data (based on historical losses, for example) are collected. Performance indicators, often referred to as Key Performance Indicators (KPIs), provide insight into the status of operational processes, which may in turn provide insight into operational weaknesses, failures, and potential loss.
Likely Risk
Security risks may stem from inadequate or failed internal processes or external events, and ultimately it is impact on systems and data that dictates the risks relevant to inform risk appetite and Key Risk Indicators. It also supports the quantification of risk appetite, key risk indicator limits, and risk capital scenario models. Identification, analysis, and costs reporting data modeling capture initial information on incident and provide a description, the dates of event and detection, the effected business area, and risk taxonomy.
Higher Indicators
According to your organization, a key element of the risk-based model is identifying and monitoring providers considered to be at a higher risk of compliance failure. Cycle time indicators are important in order to measure the processing time from a measure start to a measure end point. For each segment, calculate and monitor growth rates along with percent of risk-based capital and asset quality (and consider establishing management triggers and thresholds on these key risk indicators).
Necessary Impact
Key risk indicators include risk ratings and prioritization in which risk events are defined in terms of their probability of occurrence, severity of consequence/impact, and relationship to other risk areas or processes. You should always consider risk warnings carefully and take appropriate investment advice before making any decision to invest. Analyzing the risk attitudes of your stakeholders is necessary for the success of your risk management plan.
Potential Goals
Volatility — be it historical or implied — is widely used to calibrate risk-taking in the financial services industry. You should aspire to excel in every aspect of your work and to seek better ways to accomplish your mission and goals. Thus, ensure that you enable timely monitoring of potential future risk exposures and help provide your organization with increased understanding of risks and controls.
Done Position
Compliance or risk managers create indicator templates from which many indicators can be created. Operational risk, for capital purposes, is defined as the risk of loss from inadequate or failed internal processes, people, and systems, or from external events. Access risk analysis (ARA) only works on user level, whereas remediation is done on position level. Both scenarios can be used together depending on your business scenario.
Want to check how your Key Risk Indicator Processes are performing? You don’t know what you don’t know. Find out with our Key Risk Indicator Self Assessment Toolkit: