ATEL ERM Working Group considers Key Risk Indicators and Risk Appetite
As part of our ongoing collaboration with Association des Trésoriers d'Entreprise à Luxembourg (ATEL) we were pleased to participate in the latest meeting of their Enterprise Risk Management working group (WGERM)
Following the last WGERM held in September 2009 on the topic a follow up meeting was held in early 2010 to explore in further detail the subject of key risk indicators (KRI's). The discussion was chaired by Francois Masquellier with Vincent Galand from avantage in attendence and providing input.
The focus of the discussion was to what exent KRI's are used in risk reporting in non financial institutions, and for what purpose. It was explained that there were four categories of KRI's and that these could be used for differing purposes:
- Coincidental or Current Indicators, i.e. any indicator tracking the occurrence of a loss event or incident when it has occurred;
- Causal or leading indicators, i.e. metrics that try to detect the root causes of the risk event and are intended to provide an early warning;
- Control effectiveness indicators, also referred as “Key Control Indicators” (KCI’s) provide ongoing monitoring of the performance of controls;
- Volume indicators (sometimes called inherent risk indicators) give an indication of the scale or size of the activity where a key risk is identified.
Examples of each were contributed by attendees. Conversation moved on to determine how KRI's can be used to defined the risk appetite for an oganisation. The meeting concluded with an undertaking to revisit the topic of risk appetite in the next meeting.
You can download a summary of the discussions here.
