What do KRIs do?
KRIs help monitor and control risks. They link back to a range of operational risk management activities and processes, including risk identification; risk and control assessments; and the implementation of risk appetite, risk management, and governance frameworks.
Basically, a risk indicator can be any metric used to identify a change in risk exposure over time. They become KRIs when they track a critical risk, or do so especially well because of their predictive value. It’s ideal if they do both.
How many KRIs should you have?
Too much data can be overwhelming. Too little, and you’re not going to gain any insight or could be missing critical risk indicators. According to the Institute of Operational Risk, there is no right or wrong answer for how many risk indicators you should have, but they suggest considering the:
+ Number and nature of the key risks identified
+ Availability of the data needed for the KRIs
+ Cost to extract the data
+ Intended audience
