Key Risk Indicators

Authors: Ann Rodriguez and Viney Chadha

In the book, the authors discuss the entire set-up and implementation of a Key Risk Indicators framework that can be used as an integral part of the Risk Management Framework, as a tool that can be used to support decision making in day-to-day management.

In the first chapter, the authors explain the foundations of KRI: measuring is after all knowing. That is why you also need to know that there are different types of indicators. The book covers Key Risk Indicators, Key Performance Indicators and Key Control Indicators.

Very important is the common language, the Risk taxonomy, which the people in the organization must speak. This is important, amongst other things, for the recognition of deviations that may occur in the measurements and / or the interpretation thereof.

But one of the most important aspects is with regards to Risk management and KRI, is the culture of the organization. One of the possible aspects 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 well they work together.

In a few short chapters, the importance of the Enterprise Risk Management and the ERM Framework are discussed. The Operational Risk Management is discussed afterwards in a very extensive chapter. The most important program elements according to the authors are: risk and control self-assessments, scenario analysis, business environment assessments, data of internal losses, data of external losses, issues management and ultimately: the KRI.

In chapters 7, 8 and 9 the authors discuss the preparation of a KRI Framework, the life cycle of the KRI program and the KRI Project that implements everything. Chapters 10 and 11 deal with the use of KRIs and how you report about them, and what you report to them, depending on whether they do other things with the numbers … (The board does not need the same figures as Senior Management, for example).

In chapter 12, the authors discuss a tool that can determine whether an indicator is a “Key” indicator.

The story ends with a series of Case studies. The classic, Union Carbide in Bhopal could not be ignored. In addition, the authors also provide a number of KRI that could have yielded an alternative outcome. Finally, a number of concluding thoughts tell us that KRI must evolve from an art to a science. This book contributes to this.

Manu Steens

Manu works at the Flemish Government in risk management and Business Continuity Management. On this website, he shares his own opinions regarding these and related fields. Since 2012, he has been working at the Crisis Centre of the Flemish Government (CCVO), where he has progressed in BCM, risk management, and crisis management. Since August 2021, he has been a knowledge worker for the CCVO. As of January 2024, he works at the Department of Chancellery and Foreign Affairs of the Flemish Government. Here, he combines BCM, risk management, and crisis management to create a tailored form of resilience management to meet the needs of the Flemish Government.

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