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How do Key Risk Indicators work?

03/06/2016 - Operational Risk Key Risk Indicators Risk Manager KRIs

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In February this year, I ran a blog highlighting the power of the human brain and its senses in acting as a personal key risk indicator (KRI) system for personal early warning risk awareness as we journey through this inherently risky world.

This blog looks at the potentially awesome power that a well-designed and well applied
KRI system can have in the business world.

KRIs have multiple purposes. The main one is to act as an early warning system to prompt initial investigation and response so as to deal with a risk early in its life. It helps a firefighting risk manager to become a proactive risk preventer. At a wider level, KRIs allow us to “measure” risk and incorporate risk into risk-based performance measurement, risk-based decision making and risk-based incentive schemes.

So how do KRIs work?

KRIs operate on the fact that as risk develops through its life, from root cause(s), through event(s) to final impact(s), red flags, symptoms and other evidence may be given off.  KRIs tap into this information and turn it into intelligence to then be investigated and acted upon to deal with the risk most appropriately.

As an example, I was reading a recent article in an in-flight magazine which was referring to new technology using fibre-optic technology to monitor conveyors in the mining industry. They measure noise levels on belt idlers along the full length of the conveyor. This allows prediction of the failure of the idlers, allowing maintenance staff to replace worn parts before they break, rather than waiting for them to fail, thereby avoiding the cost and wider repercussions on lost production and safety. 

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There is no truer cliché in risk management than “prevention is better than cure” and KRIs, when designed and used properly, give your business the capability to make this a reality.

Setting up a quality KRI process across your business is not easy nor without its challenges, but the effort pays big dividends when expended wisely. Many KRI processes we have observed have not been set up well. Many KRIs are lagging – too late to act as an early warning indicator. Many KRIs have a weak relationship with the risk and give false positives and false negatives.

The key is to develop strong leading indicators.

If you would like to know more and gain the skills required to unleash the power of KRIs in your business, join Protecht in Sydney on 19th October - 2017

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HAVE A LOOK AT OUR UPCOMING TRAINING COURSES

-Risk Appetite.

  • In-depth understanding of Risk Appetite and Tolerance.
  • An understanding of how Risk Appetite and Tolerance can be articulated for a range of risk types.
  • Ability to determine a Risk Appetite and Tolerances for each key risk category.
  • How to use Risk Appetite as a basis for Board risk reporting.

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     Date: 17th October, 2017
     Location: Sydney NSW
     The cost of the course is $990 + GST.
    This fee includes all materials, lunch, morning and afternoon refreshment but excludes        your travel, accommodation, and incidentals.  

More information HERE.

-Risk and Control Assessment.

Covers the principles and methodologies of a strong risk assessment process, how to set them up and run them successfully. Participants will work on a case study using live ERM software to put into practice the concepts covered.

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  Date: 18th October, 2017
  Location:  Sydney NSW
  The cost of the course is $990 + GST.
  This fee includes all materials, lunch, morning and afternoon refreshment but excludes   your travel, accommodation, and incidentals.

More information HERE.

-Key Risk Indicators.

Covers all aspects of developing and successfully implementing a strong Key Risk Indicator (KRI) framework from identifying strong KRIs, through to developing thresholds and implementing an embedded process for their collection, reporting and follow-up. Participants will work hands-on with a live ERM system to practically illustrate many of the concepts covered.

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Date: 19th October, 2017.
Location:  Sydney NSW
The cost of the course is $990 + GST.
This fee includes all materials, lunch, morning and afternoon refreshment but excludes your travel, accommodation, and incidentals.

More information HERE.

Send us an email to marketing@protecht.com.au to register your interest.

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