Risk Management: The Power of Key Risk Indicators
In Risk Management, Key Risk Indicators can be a very powerful tool. The trick is to dedicate the thought and effort to designing the right metric, rather than focusing on the definitions of what is leading vs lagging, cause vs effect, control vs risk vs performance.
If the ‘usefulness’ test was applied, it would be: “Has the KRI led to better business decisions?”
Gail Danvers, Director of psd’s Banking & Financial Services sector, recently hosted a forum to explore the Power of Key Risk Indicators. Helen Pykhova, Director of the OpRisk Company, was the key speaker for the afternoon. Helen, a practitioner with over 20 years’ experience in financial services, is well known in the industry as a respected Operational Risk Trainer, as well as being Chair of the Operational Risk Committee of the Association of Foreign Banks, and Director of the Institute of Operational Risk, responsible for the Institute’s Educational portfolio.
Operational risk is defined as the risk of loss resulting from failed internal processes, people and systems, or external events. Key Risk Indicators are an important tool within risk management and are used to enhance the monitoring and mitigation of risks and facilitate risk reporting.
Helen’s presentation focused on the practical application of Key Risk Indicators. The aim of the forum was to educate and debate with other risk professionals on the subject of KRIs – their purpose, design, use and, of course, their potential benefit to the business.
The subject created an engaging discussion, with most people in agreement that whilst there is clearly a great deal of benefit to having KRIs, more often than not they are not designed or used effectively enough to support the strategic business objectives. However all were in agreement that when designed, delivered and monitored properly KRIs are a fantastic tool that should be used by senior managers.
Thank you again for the KRI event. It was informative and helped us shape some thoughts on our approach. – Barry Murphy, Director – Risk and Compliance, British Business Bank.
Gail leads psd‘s rapidly expanding Banking & Financial Services and Risk & Compliance capabilities. She specialises in Executive, Non-Executive and Director appointments and has an excellent track record of delivering on CRO, COO and CFO appointments, working both with Big Four and global institutions, as well as the growing fintech sector.