How are Key Risk Indicators Different from Key Performance Indicators?

Rather than my standard written article, I thought it would be fun to change things up a little bit.

Below is an excerpt from my recently completed ERM Advanced Techniques class, which is part of UCLA Extension’s ERM Certificate Program. Specifically, the following segment dives into key risk indicators (KRIs) and key performance indicators (KPIs).

Key risk indicators are a tough challenge for many companies. Previous articles on this subject have focused on why organizations struggle with KRIs and a fatal error or trap many fall into when using them.

The following section from the course gets to the basics of both key risk indicators and key performance indicators, their major differences, and how using them can help the company get ahead of both risks and opportunities.

Below are specific time stamps for each slide for easy reference. However, I strongly recommend watching the entire 17-minute video.

  • What is a Key Risk Indicator? (0:00)
  • What is a Key Performance Indicator? (0:55)
  • Why use metrics? (1:47)
  • Different Approaches – There’s no one “right” way to use metrics (4:59)
  • What is a Lagging Indicator? (8:19)
  • What is a Leading Indicator? (9:19)
  • Benefits/Weaknesses of Lagging and Leading Indicators (9:41)
  • Metrics: 3 Case Studies (12:49)

Has your company successfully used KRIs as a leading indicator that a risk is materializing? Or have the KRIs gotten to be an overwhelming future task on your list?

To share your thoughts on this topic, please feel free to leave a comment below.

KRIs are definitely a tough nut for many companies (and professionals) to crack, especially if ERM is still in its infancy. If your company is trying to harness this tool to better anticipate risks and opportunities but struggle on where to start, please don’t hesitate to reach out to me to discuss your current situation, goals, and options for helping you get there.

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