Key risk indicators (KRIs) are measures used to signal rising operational risk or to assess operational risk exposure. In some instances, they may be little more than key ratios that the board and management track as indicators of evolving problems, which signal that corrective or mitigating actions need to be taken. Other times, they may be more elaborate, involving indices based on aggregating a number of risk indicators.

The following is a list developed by 50 large banks that takes more than 1,800 risk indicators and combines them into 12 indices or KRIs. Individual institutions use index values along with trigger points to signal needed corrective/mitigating action.

Audit Issue Management Index tracks the number and severity of audit issues that have not been resolved in a timely fashion.
Business Continuity Index tracks the vulnerability and criticality of processes, the quality of continuity plans and the frequency and adequacy of practices and tests.
Failed Customer Interactions Index tracks the number, duration and severity of failures to provide customers with prompt, reliable and effective service.
Information Security Index tracks the number and severity of virus attacks that had any success, of critical vulnerabilities left unresolved for a significant period and of security events with client impact.
Information Technology Index tracks the availability of technology at critical periods for critical purposes.
New Product Index tracks the rate of introduction of significant, new products with major implications for people, processes or systems.
Operational Losses is the dollar amount of losses.
Process Breaks Index tracks the rate, severity and size of trading, clearing and settlement failures and their customer impact.
Profitability Index tracks the number, suddenness and severity of unexpectedly high profits or losses.
Policy Exceptions Index tracks the number and significance of policy exceptions.
Regulatory Index tracks the number and severity of comments made and fines levied by bank and securities regulators.
Staff Turnover Index tracks turnover rates in critical functions.

The purpose in presenting these key risk indicators isn’t to endorse their use, but instead to illustrate one way to monitor operational risk on a regular basis. In fact, it is likely your bank has its own key risk indicators. You may not see them as such. For example, the limits incorporated in the bank’s policies are a form of KRI. Comparisons of actual and budgeted financial amounts and variances between the two are yet another form of KRI. The bottom line: A KRI is any measure the board believes will help it spot an evolving problem.