Key Risk Indicators (KRIs) are metrics used by the bank to provide early signals of risk exposures in various areas of the bank that could have an effect on the achievement of objectives. They are based on established practices or benchmarks and are developed consistently across the entire institution. KRIs provide an unambiguous and intuitive view of the highlighted risk and allow for measurable comparisons across time and business units. KRIs also provide opportunities to assess the performance of risk owners on a timely basis while consuming resources efficiently.
The primary beneficiaries of KRIs will be the risk owners themselves. They will have a set of predictive tools that should allow them to better manage their areas of responsibility and meet the objectives set for those business units.
The Risk Manager (person charged with oversight of the ERM process) can work in concert with the risk owner to identify appropriate trigger points and actionable plans to resolve problematic conditions brought out by the KRI process.
Senior management may need to review KRI data for risks and opportunities with significant potential impact to the bank. Likewise, the Board of Directors may only require updates of the most significant KRI data in order to be confident that the risk management process is functioning as designed.