Enterprise-wide risk management is recognised as a critical success factor in delivering stakeholder value and mitigating the prevalence of increased regulatory burden across Regulated businesses. An increasingly key strategic area of focus is the use of Key Risk Indicators (KRIs) to measure risk across the organization.
KRIs are hugely significant point of reference in determining business health and tracking the likelihood of a risk occurring, offering a valuable opportunity for pre-emptive mitigation where possible. Despite this, the Institute of Operational Risk Management acknowledges that relatively little information is available on how to best utilise this critical resource.
“The world has never been more full of risk” Thomas Aquinas, 1245
The creation and specification of KRI data is critical to ensure accuracy. Xactium’s Managing Director, Andy Evans describes some of the challenges Risk and Compliance Managers face when gathering risk data to input for KRIs:
“The source of risk data can be very diverse. Sources can include existing systems, spreadsheets, documents and databases. KRI data can therefore be collected both manually and automatically depending on whether a mechanism is available for integrating the data collection with existing systems. All these requirements make collecting and aggregating KRI data very challenging. However, the more efficiently and effectively it is carried out, the timelier and more accurate the results will be”.
The Business Case for KRIs
Beyond the immediate benefits to your risk management team, the advantages of implementing a robust and KRI program are far-reaching, including:
- Better informed planning and decision making processes
- Reduced insurance costs through the proof of effective risk management
- Reduced capital reserve requirements through identification of potential loss events
- Increased profitability and minimised exposure through more effective controls and corporate governance
- Avoidance of regulatory oversight, fines and damage to reputation
- Enhanced credit ratings and reduced borrowing costs
However, achieving a successful implementation of KRI’s can be a real challenge. To address this, we have published a whitepaper that focuses on some of the key dos and don’ts to leveraging KRIs in your Organisation.
Utilising our experience in helping over 4000 users onto our GRC platform, Xactium have developed a KRI Manager to address these benefits - read more about our solution or watch a short demo video (3 mins).