I am interested to hear your thoughts on the efficacy of KRIs. Do you use them in a formal sense? How do you use them, for example as part of your risk appetite process or framework? What has changed since using them?
In my little world I have whittled the KRI picture down to this:
The leadership team (including Board) set the direction for the organisation along with specific objectives. These should have KPIs.
The leadership team then set a risk appetite for each objective. Each has KRIs.
Think of it like this. KPIs are indicators of what has happened over the last quarter as far as the objective is concerned while the KRIs are indicators of what is likely to happen to the objective in the next quarter.
If you do this your KRIs are aligned to what matters to management and will deliver value to the organisation as they are early warning indicators of future performance.
Having said that, KRIs need to be designed well. Seek quality, not quantity – which measure or mix of measures tells 80% of the story? KRIs should be drawn from the strategic risk profile of each of the strategic objectives. They should be monitored, calibrated and changed if they are not providing early warning.
For those who are looking into KRIs I hope these tips help. For those using them, I would love to get your thoughts, in particular I would love to hear your success stories.