Mastering Risk Management

INTRODUCTION: WHAT DO WE MEAN BY KEY?

All indicators (sometimes known as business metrics) tell you about the state of a particular item over a period of time. They are rarely used as a single point of time data, but rather as a series by reference to previous values to detect movements whether these are by day, week, month or quarter. In particular in risk management terms, these movements may indicate that the firm is heading towards breaching its risk appetite.

Key risk indicators (KRIs) are a fundamental part of any comprehensive risk management framework and yet many firms seem to be puzzled and confused by them. The confusion may be less if they are called IRKs (indicators of risks which are key) or IKRs (indicators of key risks). They ...