In comparison with other operational risk management and
measurement tools such as loss data (internal, public
and consortium), risk-and-control assessments, capital
allocation and performance measurement, key risk
indicators (KRIs) remain one of the outstanding action
items on most firms’ to-do lists, along with scenario
analysis. KRIs are not new, but, up until recently,
attempts to implement such programmes have often been
characterised as less than effective.
In this chapter, we will seek to demystify KRIs,
understand the basic fundamentals in identifying,
specifying, selecting and implementing quality
indicators, and consider how to monitor and report on
them, in conjunction with other useful operational risk
management information, to create powerful management
reporting. We will also examine the potential for more
advanced applications of KRIs, touching on the
measurement of risk for correlation purposes, and the
potential for composite indicators as well as KRI
benchmarking. pdf
