Key risk indicators examples, are shown as below depending on the category of risk. A corporate risk appetite framework enables individuals to monitor the strategic risks they are taking within their organization. It allows management to understand which ones may not work out in case of an adverse outcome and how much exposure each KRI. Has been given by setting limits on it not to exceed those levels with expected results from past occurrences or other critical metrics for assessing potential impacts (e.g., budgets). The organization Risk Appetite framework provides.
● Risk Appetite Policy
● Risk Limits (Triggers) and Thresholds
● Risk Appetite Statement
Limits and triggers must be authorized as part of an audit committee’s core risk appetite statements at the company level. Limits are used to define boundaries within which all risks should be handled, so they’re not exceeded; Triggers help identify when a particular kind (or group) risks approach or have gone past their limit for corrective action to take place – e.g., shutting down certain lines in case there is fire.
A board that exercises sound oversight over its business needs has two crucial tools: limited responsibility structures with clearly defined roles/responsibilities on the one hand.
Any material changes in risk appetite statements, as well as the limits and triggers of those statements, must be approved by the Board Audit Committee. Divisions engaged in establishing a strategic risk appetite should look to the ERM Framework Policy for further information on setting KRI limitations and trigger levels. Key elements of a risk register might have a column on key risks.
As stated in the Policy’s central section, the responsibility for risk appetite embedding belongs to the Managing Director. The function of a Risk Owner is to ensure that:
● The Company’s strategic objectives are linked to Risk Appetite;
● The stated risk appetite is made clear to the company departments.
Each department will create action plans to embrace responsibility for planning and implementation (i.e., transforming strategy into the business plan). The business divisions’ operational, reporting, and compliance goals must be determined to support the strategic objectives.
Managers must be able to recognize significant moments that may influence their goals. Formal records must be kept and preserved for future study by the second and third lines of defense. Key risk indicators can form a part of key elements of a risk register.
business continuity management
Business continuity management (BCM) is a comprehensive approach to prepare an organization for potential disruptions. By identifying and addressing risks, organizations can continue operating during and after an event.
There are three key components to BCM:
– Disaster Recovery: This refers to the process of restoring critical systems and data following an interruption. Disaster recovery plans should be tested regularly to ensure they are effective.
– Business Continuity Planning: This involves creating plans and procedures to keep operations running in the event of an interruption. This may include things like having backup power generators or alternative suppliers.
– Crisis Management: This is the process of responding to and managing an incident. It includes establishing a command center, communication plans, and evacuation procedures.
Business continuity is the process of maintaining business operations during a disruptive event. The goal of business continuity is to minimize downtime and minimize the negative impact on the business.
There are many aspects to consider when crafting a business continuity plan, but some key elements include:
-Identifying critical business functions and processes
-Developing backup plans for critical functions
-Establishing clear lines of communication
-Training employees on the Business Continuity Plan
-Testing the plan regularly to ensure it is effective.
business impact analysis
Business impact analysis (BIA) is a systematic process to determine and evaluate the potential effects of an interruption to critical business operations as a result of a disaster, accident or emergency.BIA helps organizations identify which activities are critical to business operations and continuity, and the resources required to maintain them.
The goal of BIA is to minimize the adverse impact on business operations, and to ensure a timely and effective response and recovery in the event of an interruption.BIA is typically performed by business continuity or emergency management professionals, and should be revisited on a regular basis to ensure that it remains accurate and up-to-date.Organizations should also consider conducting a risk assessment in conjunction with BIA to identify potential threats and vulnerabilities that could impact business operations.
business continuity plan
A business continuity plan is a document that outlines how a business will continue to operate during and after an interruption in service. The purpose of a continuity plan is to keep the business running, minimize downtime, and protect employees, customers, and other stakeholders. A well-designed continuity plan will help ensure that the business can weather any type of disruption, whether it be a natural disaster, pandemic, power outage, or cyberattack.
A continuity plan typically includes the following elements:
-A list of essential personnel and contact information
-A list of critical business functions and the steps required to continue them
-An inventory of essential supplies and equipment
-Procedures for customer service and order fulfillment
-Backup plans for communication, data storage, and other vital systems
-A crisis management plan for dealing with disruptions
-Testing and revision procedures to ensure that the plan remains up to date.
business continuity program
A business continuity program is a set of procedures and information designed to help an organization continue operating during and after a major disruption.The goal of a business continuity program is to minimize downtime and ensure that critical functions can be quickly resumed following an interruption.
Business continuity programs typically include plans for backup power, data storage, and communication, as well as procedures for preserving essential documents and records.In some cases, businesses may also maintain duplicate facilities or components that can be rapidly deployed in the event of a disruption.
A well-designed disaster recovery plan can help to minimize the impact of a major interruption to your business. Here are some key elements to consider when developing your plan:
-Identify critical systems and data: What are the most essential functions of your business? What data would be most devastating to lose?
-Develop a backup plan: How will you keep vital systems and data safe in the event of a disaster? This may include backing up to a remote location, using cloud-based storage, or physically storing backups in a safe place.
-Test your plan regularly: Make sure your backup systems are working as they should, and that all staff know what to do in the event of a disaster. Regular testing will help to ensure that your plan is effective and can be executed quickly and smoothly in the event of an emergency.
Key risk indicators examples
A company’s level of exposure to risks is constantly changing, and the Board needs to monitor it regularly. There are different ways to measure risks: some examples include budget, expected future losses, and possible returns on investments. Risk statements allow a company or organization to understand what they can tolerate with anticipated results from past occurrences.
This statement also helps clarify which risks should not be taken at all because it exceeds what they’re comfortable with and creates action plans for those that are necessary.
The most common key risk indicators (KRI) are Return On Investment (ROI), Expected Future Losses (EFL), Budget. Examples of key risk indicators include the following. The key risk indicators need triggers and thresholds for observation.
A key risk indicator is any measurable factor that can help predict the likelihood of a particular risk occurring. Developing key risk indicators is an important part of risk management, as it allows organizations to focus their resources on the areas that pose the greatest threat. There are a number of different factors that can be used as key risk indicators, including financial metrics, compliance data, and safety records.
Significant risks are those that have the potential to cause serious harm or damage to an organization. Identifying and understanding these risks is critical for effective risk management. There are many different factors that can contribute to a risk being classified as significant, including the severity of the potential consequences, the likelihood of the event occurring, and the impact it would have on the organization’s operations. Key risk indicators template can be used to monitor significant risks.
1.Human resource management risks–
● Several unfilled vacancies per total number of resources required per department:-Many companies face problems recruiting the necessary number of employees because there is a lack of applicants. The demand for skilled workers has increased quickly over recent years, especially in technical areas. Statistics show that more than half the companies work with unfilled vacancies, which costs time and money while also dragging down production levels.
● Several unresolved employee complaints per total number of employee complaints received:-Because of various circumstances, employees are subject to adverse working conditions. But they don’t have the chance to complain directly because formal negotiations are considered very risky. The result is that their grievances build-up, which could even lead to an organizational breakdown. It happens especially when management or other groups in charge of social dialogue or trade unions fail to take action.
● No. of employees without a formal mentor/coach for internal career development:-In order to be successful in the long run, employees need support and guidance. It is essential when they are still new on the job or have been newly assigned to a different position. They may feel insecure and unable to state their needs. This can be operational risk management.
● The attrition rate:-One of the most common indicators of personnel management is the rate at which employees leave their jobs. A high attrition rate results in excessive expenditures for recruitment and training, which reduces productivity levels and robs companies of an essential source of potential growth.
2. Project management risks
● Project Commissioning exceeding (x) days from the official commissioning date:-Due to the general time it takes to complete a project, there is always a risk that the approved or actual time-frame will vary, which may result in unforeseen circumstances. It may include anything from geographical issues (e.g., earthquakes), delays.
● Project overruns totaling (x)% of total project budget and (x) of thoroughly planned for project execution duration:-Due to the generally high costs of construction and other factors, there is always a risk that you will not spend all the money that has been budgeted for your project.
● Project Commissioning delayed by (x) months from the scheduled date:-Due to overall ‘time’ restraints; there is always a chance that the schedule will be delayed, leading to any number of unfortunate circumstances.
● (x) incidences of Vendor/Contractor negligence/malpractice:- As it is highly likely that third parties play a role in the execution of your project, there is always the risk that their negligence or malfeasance can lead to issues within your project.
3. Compliance risk management/Legal and regulatory
● Fines by regulatory authorities totaling $ (x):- The amount of fine that an organization pays to authorities for breaching the regulation. Fines by regulatory authorities totaling $ (x) are usually the result of not complying with legal and regulatory requirements. The amount that the organization is fined depends on whether it was negligent or intentional.
● Compliance breach with minimal consequences and readily rectified:- The act of breaching the regulation does not lead to severe consequences for the organization. The breach is easily fixed and can be stopped or prevented. Intentional compliance breach:- When an organization has premeditated intent to break the law, rule, or regulation to gain some unfair advantage over others; examples include tax evasion, false advertising. Third party risk compliance issues might impact an organization projects.
● Litigation totaling $ (x):- An organization is taken to court by another party for breaching the regulation, which leads to litigation where both sides present their case. Litigation can lead to significant legal fees for the organization in addition to the fine. The amount of money an organization spends on litigation is usually much higher than fines by regulatory authorities, especially when multiple parties are involved.
● Contract default totaling $(x):- When an organization does not honor or follow the terms of a signed contract, it is said to have defaulted on the agreement. Contract defaults can be caused by several different events, such as the bankruptcy of another company involved in the contract and unforeseen economic times. A contract default leads to financial penalties depending on whether or not it was intentional. This is one of the operational risk examples that affects critical business operations.
● Small claims totaling $(x):- Small claims usually concern an amount equal to or less than $ (x). Small claims typically take the form of a ‘breach of contract’ and put the creditor in a better position. For example, if someone withdraws from an agreement before providing their services, they are liable to pay.
4. Health & safety risk
● No. of workplace injuries:-The workplace is where most people spend a significant part of their day. They must be safe and healthy at all times so that no mishaps occur. Workplace injuries can be life-changing or even fatal in nature, which makes safety measures extremely important. There have been numerous cases of injuries at the workplace.
● No. of fatalities/deaths:- No matter how safe a job is, accidents can happen at any time, resulting in fatalities. They should always be aware of all safety policies and follow them carefully.
● No. of days lost due to workplace/injuries:-The workplace can be a place that requires a lot of movement and energy. Days lost due to work-related injuries have been higher than expected. It is essential always to be careful while going about your daily schedule at your workplace.
5. Political risk
● $ (x) total political risk exposure:- The political risk insurance covers against loss resulting from certain political risks, such as revolution, civil commotion, government sanction/prohibition in the event of war or threat of war, military action by a foreign power, aggressive nationalism or other similar events which cause physical damage to property and equipment.
● (x)% Total Political Risk Exposure (% of the balance sheet): Calculate political risk exposure as a percentage of profit and loss.
● (x)% political risk exposure (in the balance sheet) insured against political risk.
● (x)% remaining political exposure (after application of % of assets insured against political risk.
6. Financial risk
● $ (x) per incident on Company’s balance sheet, up to $ (x) million per year:- The Company provides a derivative product that allows customers to hedge their cash flow exposures. The bank takes on the counterparty risk of the wholesale market and insures this exposure with external reinsurance companies.The number of customers retained by customer retention strategies and their percentages.
● Outstanding debtors (90 days) of up-to (x%):- The Company is exposed to the credit risk of its customers. The Company manages its credit exposure through processes put in place to monitor its customers’ outstanding debts. Outstanding debts should not exceed the limits set by the Company for this type of risk.
● Cash and cash reserves are at least (x)% of the balance sheet:- The Company holds a certain amount of liquidity as it is a bank. The Company’s management decides to keep a certain percentage of assets in cash to meet its obligation and credit facilities without significant difficulties.
● Debt-to-Equity-Ratio >:- The Company has decided to use a ratio higher than the industry average to reduce its financial risk exposure. The debt-to-equity ratio of the Company is (x):(y), and the industry average is (z). Therefore, Company’s Debt-to-Equity Ratio: (x:y)=(z).
7. business continuity kri examples
Business continuity is a term that refers to an organization’s ability to maintain its operations and critical functions during and after a disaster. A key component of business continuity planning is the identification of key risks that could disrupt operations (known as KRIs, or key risk indicators). Examples of KRIs include natural disasters, pandemics, cyber attacks, and terrorist attacks.
Organizations can make contingency plans to ensure that they are able to continue operating despite the disruption. Business continuity planning is essential for all organizations, as it can help them to avoid or minimize disruptions to their operations.
8. key risk indicators cyber security
There are a number of key risk indicators (KRIs) that can help businesses and organizations assess their cybersecurity risks. Some of the most important KRIs include the number of malware attacks, the number of phishing attempts, the number of data breaches, and the number of ransomware attacks.
Businesses and organizations can gain insights into where their cybersecurity risks are highest and take steps to mitigate those risks. In addition, KRIs can also help businesses and organizations identify trends in the cybersecurity landscape and adjust their security strategies accordingly. By understanding and tracking KRIS, businesses and organizations can better protect themselves from cyber threats.
-The number of successful cyber attacks. This is a measure of how often hackers are able to penetrate a company’s defenses and gain access to sensitive data.
-The sophistication of the attacks. This measures how sophisticated and well-planned the attacks are. Highly sophisticated attacks are more likely to succeed than amateurish ones.
-The amount of time it takes to detect an attack. This is an important metric because the sooner an attack is detected, the less damage it can do.
-The number of compromised records. This is a measure of how much data is stolen or exposed in a successful cyber attack. The more records that are compromised, the greater the damage to the company.
9. key performance indicators
KPIs are metrics used to evaluate the performance of a business or organization. They can be financial or non-financial, and they can be specific to an individual team or department. KPIs can be used to measure progress towards goals, and they can help identify areas where improvement is needed.
Some examples of KPIs include:
-Customer satisfaction scores
-Number of new customers
– employee turnover rate
KPIs can be customized to fit the needs of any business or organization, and they can be updated as goals change. But there are a few things that all good KPIs have in common: They’re specific, measurable, achievable, relevant, and time-bound.
The key risk indicators, limits, and trigger levels are essential to understand as they can help you mitigate risks in your Company. Suppose you’re not sure what the various key risk indicators are associated with different areas of business such as human resources, project management, or even legal and regulatory. In that case, it may be worth investing time into understanding them. Have any other questions about these concepts? Don’t hesitate – we’d love to help!. More information is found at riskpublishing.
Chris Ekai is a Risk Management expert with over 10 years of experience in the field. He has a Master’s degree in Risk Management from University of Portsmouth and is a CPA and Finance professional. He currently works as a Content Manager at Risk Publishing, writing about Enterprise Risk Management, Business Continuity Management and Project Management.