7 KPIs You Should Be Tracking To Monitor Effectiveness of Your Risk Management Initiatives

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Risk Management Key Performance Indicators

A Performance Indicator or Key Performance Indicator is typically described as a Type of Performance Measurement which evaluates the success of an Organisation or of a Particular Activity in Which and Organsation Engages In. KPI.ORG describes Key Performance Indicators (KPIs) as “the critical (key) indicators of progress towards an intended results. KPIs provides a focus for Strategic and Operational Improvement, create and analytical basis for decsion making and helps focus attention on what matters most” What has results in visible outcomes gets done.

It is against this background that for Risk Management Efforts to be Impactful and Relevant there should be Key Performance Measures that track progress towards an intended outcome.

Just like any other KPIs, Effective Risk Management KPIs should:

  1. Provide objective evidence of progress towards achieving a desired outcome
  2. Measure what is intended to be measured to help inform better decision making
  3. Offer a comparison that gauges the degree of performance change over time
  4. Track efficiency, effectiveness, quality, timeliness, governance, compliance, behaviours, economics, project performance, personnel perfomance or resource utilisation.

RiskForesights.COM has put together 7 Leading and Lagging KPIs that you track to monitor the Effectiveness of your Risk Management Initiatives:

  1. ERM Maturity Levels: How well Integrated is the Risk Management Process to Decision Making, Strategic and Operational Planning and Execution Processes
  2. Timely Identification & Mitigation of Risks: Do you Identify and Mitigate Risk Scenarios well before they materialise or you only See and Respond to Risks once they have materialised. Do Risk Scenarios inform Decision Making and Strategic Planning?
  3. Risk Adjusted Budgets and Targets: Do you proactively factor Risks into your Budgeting Processes, or you reactively adjust your Budgets once a Risk Event has materialized
  4. Movement of Risk Factors / Sources of Risks: Tracking of Risk Factors / Sources of Risks to determine how likely or unlikely the Risk Event may materialize
  5. Risk Losses or Gains: Tracking of Losses or Gains as a Result of Risk Events Materializing including Non – Compliance Penalties imposed by Regulatory Authorities
  6. Margins above Peer Performances: Tracking if your EBITDA Performance is above that of Peers and is as direct result of your Risk Management Initiatives.
  7. Insurance Premiums: A Rise or Reduction in Insurance Premiums Due to Good or Poor Risk Management Practices.

You can add your own customised KPIs to track if your Risk Management Efforts are effective or not. Of late there has been a lot of focus on Risk Management Theory as opposed to whether Risk Management is giving you desired Outcomes. What value is Risk Management having in your Organisation? How Do You Measure the Positive Impact of Risk Management in Your Organisation?

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