Bill is a branch manager in a retail bank. Last month, his bank suffered a heavy loss when senior management realized an employee defrauded wealthy customers by creating bogus accounts. The incident caused heavy losses, cost a few people their jobs, and severely eroded the bank’s reputation among customers. If Bill’s bank used key risk indicators (KRIs) to monitor the potential operational risks, the bank would likely have noticed the sudden rise of theft of official stationery and identified a higher risk of fraud.
Steve is the head of IT security at a retail chain company. Last month, he suffered a professional setback because, under his watch, hackers attacked and stole the credit card data of 5,000 customers of the retail chain. If Steve’s firm had implemented a KRI framework for monitoring risks, Steve would have noticed the increasing number of virus attacks and realized it indicated a security vulnerability and, hence, a heightened risk of attacks.
KRIs have now become an essential tool for operational risk management, thereby making any risk management framework effective. Managers need to understand the process of establishing KRIs in organizations, as well as know how to use KRIs to their maximum potential for risk management. This requires knowing:
- The concepts of KRIs.
- How to select KRIs in view of the risks faced by an organization.
- How to manage KRIs after selecting them.
- How to monitor and report KRIs to management.
As a risk management professional or a manager, are you aware of how unforeseen risks can damage your business by manifesting suddenly? Do you have a monitoring system that can warn you of potential risks in your organization? If not, can you afford to ignore these risks that can severely cripple your operations, cause financial losses, and destroy customer confidence? These are all critical questions to analyze and will give you a clear view of your KRIs.
Want to learn more?
The Accenture Academy course Establishing Key Risk Indicators (KRIs) explores KRIs—what they are, how they should be used, and how to monitor and report them to senior management to help you protect your business.