What is Key Risk Indicator (KRI)?
Key Risk Indicator (KRI) is defined as the measurable metrics or indicators used by organisations to assess and monitor potential risks and vulnerabilities that could affect the organisation’s performance, objectives, or financial stability. Unlike KRIs, KPIs are designed to focus on measuring the negative events or factors that may lead to adverse outcomes. The key characteristics of KRIs are:
- Relevance: KRIs should be directly related to specific risks that an organisation wants to monitor.
- Measurability: They should be quantifiable and based on data or metrics that can be objectively measured.
- Timelessness: KRIs are often associated with specific time frames for monitoring and reporting to enable early detection of potential risks.
- Actionable: KRIs should provide early warning signs, allowing organisations to take proactive measures to mitigate or manage risks.
Difference between KPI and KRI
Measurement is useful when it is expressed in numerical terms, so as to compare the actual performance and the targeted performance. Moreover, the measurement of both the positive things and negative things is important for the success of the business. For this purpose, KPI and KRI come into the picture. Key Performance Indicator (KPI) is defined as a measurable value that businesses and organisations use to evaluate and track their progress toward specific goals or objectives. Key Risk Indicator (KRI) is defined as the measurable metrics or indicators used by organisations to assess and monitor potential risks and vulnerabilities that could affect the organisation’s performance.