Key Risk Indicators reloaded

Abstract

Although Key Risk Indicators have been a staple for Operational Risk Management reports in financial institutions for years now, they are rarely drivers for action and their relevance is waning. The authors argue that, for Key Risk Indicators to become more relevant, they should be recast as predominantly business (first line of defence) driven and made practical rather than theoretical. After describing the current state of Key Risk Indicators and the future for such indicators in case no action is taken, an ideal situation is outlined and five recommendations are presented that serve as practical steps towards that ideal state.