KRI/KPI are metrics that management monitor and predict the state of certain events: both the chance or the likelihood that the event might happen, the potential consequences if the risk event does happen, and, similarly, the chance or likelihood that it will not happen. KRIs/KPIs are early warning signs that certain events or trends might impact a bank’s ability to achieve its goals. For more details: https://www.360factors.com/blog/managing-risk-with-key-risk-performance-indicators/

1. ABA Endorsed Solution Provider for
Risk and Compliance Management
Managing Risk with
Key Risk and
Performance Indicators

2. Bankers’ use of key risk indicators (KRIs) and key performance
indicators (KPIs) has been a bit like this. Most tell management a lot
about where the Bank has been but not terribly much about where it
is going, or worse, precious little about how the Bank got there

3. KRI/KPI are metrics that management monitor and predict the state of
certain events: both the chance or the likelihood that the event might
happen, the potential consequences if the risk event does happen,
and similarly, the chance or likelihood that it will not happen.
KRIs/KPIs are early warning signs that certain events or trends might
impact a bank’s ability to achieve its goals.

4. Key risk indicators and key performance indicators are derived from
a number of sources. A primary source is regulatory authorities as
measures of compliance with applicable regulations (e.g., Capital,
CRE loans to Capital).
KRIs/KPIs are also derived from the Bank’s Strategic Business Goals
and its Risk Appetite Statement, as well as its Policies.

5. Key Risk and Key Performance indicators are not designed to tell
you a specific answer at a specific point in time. They are designed
to tell you when things are going according to plan or not, and if not,
where you might look for the reasons that they are not.

6. To use KRI/KPI effectively, the Bank must track leading and lagging
indicators, and it must use data internal to the Bank and external data
related to the market and economic conditions it is operating in.
It is also important to benchmark the performance of those KRI/KPI to
the strategic plan objectives and assumptions, the risk appetite
statement, policy limits, peer bank performance, and of course,
regulatory limits.

7. Because as the immortal Donald Rumsfeld once said, “As we know,
there are known knowns; there are things we know we know.
We also know there are known unknowns; that is to say we know
there are some things we do not know. But there are also unknown
unknowns — the ones we don’t know we don’t know.” Wait, is that a
signpost ahead. Good Luck.

8. The management of positive risks includes the same steps of
identifying, analyzing, and exploiting the chance to get the best out
of the situation. This could mean allocating more financial, time, or
human resources to a certain task.
Managing Positive Risks

9. https://www.360factors.com/blog/managing-risk-with-key-risk-performance-
indicators/
For More Details