What is a key risk indicator (KRI)?

A key risk indicator (KRI) is correctly identified as a measurable value demonstrating risk management effectiveness. KRIs are specific metrics used to provide early signals of increasing risk exposure in various operational areas. They help organizations identify potential adverse events that could impact the organization's risk profile. By tracking these indicators, organizations can make informed decisions and take proactive measures to mitigate risks before they become significant issues.

For instance, KRIs can include metrics such as the rate of compliance breaches, operational downtime, or changes in the financial ratios that indicate financial instability. When monitored appropriately, these indicators not only help in assessing the current risk landscape but also serve as tools for improving risk management practices within the organization.

While corporate governance, regulatory requirements, and internal audits play significant roles in an organization's risk management framework, they do not specifically define or embody the concept of KRIs as effectively as the measure of risk management effectiveness does.