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08/12/2017 / Operational Risk, Key Risk Indicators, Risk Manager, KRIs

How do Key Risk Indicators work?


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. Read article: Operational Risk Management - Learning from yourself as an expert already.

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.

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