What Is Operational Risk Management, Kri And Kpi?

1548 Words May 13th, 2016 7 Pages
Introduction
1.1 What is operational risk management, KRI and KPI?
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, systems or external events where strategic, systemic and reputation risk are not included.
KRI & KPI:
Definition of KRI - “It is a metric for measuring the likelihood that the combined probability of an event and its consequences will exceed the organization’s risk appetite and have a very negative impact on an organizations ability to be successful.” (Rouse, M. 2016)
Definition of KPI - According to Investopedia it is a set of quantifiable measures that a company uses to gauge its performance over time. These metrics are used to determine a company’s progress in achieving its strategic and operational goals, and also to compare the company’s finances and performance against other businesses within its industry.
1.2 Why are these indicators important?
Why KPIs are important:
1. Enables top management to monitor performance of different processes taking place at the organization with the minimum time and effort needed
2. Enables top management to check the compliance of the current performance level with the expected one. Any deviation will cause an interruption to the organization’s mission to achieve its objectives. Corrective actions will be implemented to guide performance on the expected path.
3. KPIs validate the strategic plan. By implementing the strategic plan of the organization, the vision can be…
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