Glossary term
Key Risk Indicators (KRIs)
Subject: Risk Management, Risk Assessment and Quantification
Also known as: KRI, Key risk indicator, Early Warning Indicator, EWI
Key risk indicators are measurable signals that show a risk is rising, usually with thresholds that trigger escalation before losses occur.
Explanation
A KRI turns a risk into a number someone can watch. Staff turnover, system outages, overdue loan repayments, customer complaints and open audit actions are common examples. Each one has an agreed threshold, often in green, amber and red bands, and a named owner. When a threshold is crossed the owner explains and acts, and serious breaches go to senior management or the board risk committee. Indicators that move before a loss, such as rising missed payments before defaults, are often called early warning indicators. A good KRI is easy to measure, tied to a specific risk and tracked over time. Too many dilute attention. Thresholds link to risk appetite, because they express how much exposure the board accepts. Boards use the trend lines to choose when to intervene, instead of relying on gut feel.
Example
A retail lender tracks the share of loans one month overdue as a KRI for credit quality. Amber starts at 3% and red at 5%. When the figure reaches 3.6% for two months in a row, the credit risk head reports it to the risk committee, which tightens approval criteria for new loans.
Not to be confused with
- Key Control Indicators
- KCIs measure how well controls work. KRIs measure how much risk the organisation is exposed to.