Key Risk Indicators (KRIs) are metrics used to measure Risk. Any piece of data that can perform this function may be considered a KRI.
KRIs are defined occurrences or trends that show whether a risk is more or less likely to occur over time.
Use the KRIs feature in TriLine GRC to periodically schedule and record measurements to monitor Key Risk Indicators. Action can then be taken if the indicator shows a deterioration in the trend or rating of a particular risk.
Examples of KRIs
The following table shows some examples of KRIs.
Examples of KRIs
KRI
KRI Measurement
Senior Management Turnover
The number of Senior Managers that have left the organisation in the last quarter.
OH&S Claims
The number of Occupational Health and Safety claims submitted in the last month.
System Downtime
The number of hours that the computer system has been offline in the last month.
KRI Links
KRIs can be linked to Risks:
Examples of KRIs and related Risks
KRI
Risk
Senior Management Turnover
Inability to attract and retain key personnel.
OH&S Claims
Injuries to employees suffered at work.
System Downtime
Core banking system unavailable to clients.
KRIs can also be linked to Events:
Examples of KRIs and related Events
KRI
Event
Senior Management Turnover
Resignation of Chief Financial Officer.
OH&S Claims
Employee has suffered a broken ankle by slipping over in the toilets.
KRIs are scheduled periodically to record the required measurement, ; such as:
Monthly,
Quarterly (3 months),
Half Yearly (6 months),
Yearly (12 months),
Sesquiennial (18 months),
Two Yearly (24 months),
Three Yearly (36 months),
etc.
The Due Date of these measurements is usually in the following month; e.g. a monthly measurement for period January would have a Due Date in February because January needs to finish to have the final measurement.
Selecting a KRI Indicator
You can select from 4 different KRI Indicators, depending on how you want to measure the KRI:
Choose ‘Upper Limit’ where low KRI indicator values are better than high values.
For example, you may have created a KRI to measure how many WHS incidents have been reported over a period of time. Using the ‘Upper Limit’ Indicator, you can apply threshold values that TriLine GRC will use to set the KRI Trend and Rating each time a KRI Measurement is generated.
The screenshot below shows the ‘Upper Limit’ Indicator settings for such a KRI Indicator. Based on the organisation’s policies, the Indicator settings are as follows:
1 The ideal value (the ‘Target’) is zero WHS Incident reports for the month.
2, 3 A warning is to be raised if 1 or more WHS Incidents reported for the month.
4 The organisation will not tolerate any more than 2 WHS Incident reports per month (‘Threshold’ = 3).
Choose ‘Range’ where the ideal KRI value is a balance between two undesired extremes.
An example of this may be a financial institution that needs to maintain a certain percent tolerance to meet regulatory requirements, but not be so conservative in lending that the business suffers.
The screenshot below shows ‘Range’ Indicator settings for this example—the amount of percent tolerance that the organisation has at a given point in time.
1 The organisation wants to take immediate action to rectify percent tolerance increases 25% and above. This figure is set as as the ‘Upper Limit’ indicator.
2 If the percent tolerance increases above the target, this indicates that the organisation an impact on company performance. The organisation has set a ‘Warning Top’ value of 23%.
3 The organisation has determined that the ideal value (the ‘Target’) is 21.5%.
4 The organisation wants to know if percent tolerance drops from the Target as this indicates a possible risk to the regulatory requirement. A ‘Warning Lower’ value of 20%.
5 The regulations require that the organisation has at least 18% percent tolerance , so this figure is set as the ‘Lower Limit’ value.
Choose ‘Manual’ where the measurement cannot be readily defined using values. Type a description of what the indicator should be.
This type of Indicator will likely require attachments in support of the Measurement activity. You can make an attachment mandatory for Measurement completion (see the Mandatory Attachment option (10) on the ‘Task’ tab).
Choosing a KRI Limit Type
Choose a KRI Limit Type to suit the Indicator you want to measure.
For ‘Lower Limit’, ‘Upper Limit’ and ‘Range’ Indicators, you can select:
Number,
Currency, or
Percentage.
Note: You can use figures of up to 2 decimal places for each of these Limit Types.
For the ‘Manual’ Indicator, the ‘Text’ Limit Type is your only option.
How KRI Trend and Rating are calculated
A KRI’s Trend and Rating values are set automatically when completing a KRI Measurement. The settings are based on:
Note: The Trend and Rating settings can be overridden for all Indicators except ‘Manual’.
Calculating KRI Trend
In principle, the calculation of the Trend is a comparison between:
The difference between the current value and the Target value, and
The difference between the new value and the Target value.
The table below shows the possible Trends and the conditions under which a particular Trend is generally set by TriLine GRC.
Note: Treat these conditions as a guide only. The algorithm used by TriLine GRC to determine Trend is more complex and may result in TriLine GRC applying a different Trend when analysing some KRI Indicator settings.
Conditions under which TriLine GRC will set a particular Trend for a KRI
Trend
Conditions for setting Trend
Improving
The difference between the new value and the Target value is less than the difference between the current value and the Target value.
Static
The difference between the new value and the Target value is the same as the difference between the current value and the Target value.
Worsening
The difference between the new value and the Target value is greater than the difference between the current value and the Target value.
Remember: You can override the displayed Trend and/or Rating for a KRI if you are sure that the ones determined by TriLine GRC do not accurately reflect the KRI value changes for a particular KRI Measurement. See The KRI Page ‘Measurement’ tab items 4 and 5.
Calculating KRI Rating
TriLine GRC determines a KRI’s Rating by:
Comparing the value of the KRI against the value bands in the Indicator settings, and
Setting the Rating to reflect the applicable value band (see the tables below).
Ratings for ‘Upper Limit’ Indicators
Rating
Conditions for setting Rating
Acceptable
The new value is between the Target value and the ‘Warning Start’ value.
Warning
The new value is between the ‘Warning Start’ value and the ‘Warning End’ value.
Unacceptable
The new value is higher than the ‘Warning End’ value or the ‘Threshold’ value.
Ratings for ‘Lower Limit’ Indicators
Rating
Conditions for setting Rating
Acceptable
The new value is between the Target value and the ‘Warning Start’ value.
Warning
The new value is between the ‘Warning Start’ value and the ‘Warning End’ value.
Unacceptable
The new value is lower than the ‘Warning End’ value or the ‘Threshold’ value.
Ratings for ‘Range’ Indicators
Rating
Conditions for setting Rating
Acceptable
The new value is between the ‘Warning Top’ and ‘Warning Lower’ values.
Warning
The new value is between either: the ‘Warning Top’ and the ‘Upper Limit’ values; or the ‘Warning Lower’ and ‘Lower Limit’ values.
Unacceptable
The new value is either: equal to or greater than the ‘Upper Limit’ value; or equal to or less than the ‘Lower Limit’ value.
