Authors: Ann Rodriguez and Viney Chadha
In the book, the authors discuss the entire setup and implementation of a Key Risk Indicators (KRI) framework that can serve as an integral part of the Risk Management Framework, as a tool to support decision-making in day-to-day management.
In the first chapter, the authors lay out the foundations of KRI: to measure is, after all, to know. Hence, it is also important to understand that there are different types of indicators. The book delves into Key Risk Indicators, Key Performance Indicators, and Key Control Indicators.
A crucial aspect is the common language, the Risk taxonomy, which the people in the organization must use. This is vital, among other things, for recognizing deviations that may occur in the measurements and/or their interpretation.
However, one of the most critical aspects regarding Risk management and KRI is the organization’s culture. One possible aspect is how committed the employees are to achieving common objectives. Another aspect is how well the three lines of defense have been developed and how effectively they collaborate.
In a few concise chapters, the significance of Enterprise Risk Management and the ERM Framework are discussed. Operational Risk Management is then explored in a very comprehensive chapter. According to the authors, the most crucial program elements are: risk and control self-assessments, scenario analysis, business environment assessments, data on internal losses, data on external losses, issues management, and ultimately, the KRI.
In chapters 7, 8, and 9, the authors cover the preparation of a KRI Framework, the life cycle of the KRI program, and the KRI Project that implements everything. Chapters 10 and 11 focus on the usage of KRIs and how to report on them, and what to report, depending on the use of the data… (The board, for example, does not need the same figures as Senior Management).
In chapter 12, the authors introduce a tool that can determine whether an indicator is a “Key” indicator.
The book concludes with a series of case studies. The classic case of Union Carbide in Bhopal is notably included. Moreover, the authors also suggest several KRIs that could have led to an alternative outcome. The final thoughts suggest that KRI must transition from being an art to a science. This book contributes towards that end.