What is a key risk indicator (KRI)?

A key risk indicator (KRI) is fundamentally a measure that provides insight into the level of risk exposure an organization might face in relation to its strategic objectives. By tracking these indicators, organizations can proactively identify potential risks that could impede their goals. KRIs are crucial in risk management because they help stakeholders understand the likelihood and impact of various risks, enabling timely decision-making and mitigation strategies.

In contrast, other options focus on metrics that do not directly pertain to measuring risk exposure linked to objectives. For instance, financial forecasting relates to predicting future financial performance rather than assessing risk. An assessment of business performance typically evaluates operational efficiency or effectiveness, while a compliance metric centers on adherence to laws and regulations—none of which specifically monitor risk exposures in relation to the organization’s risk management framework. Therefore, the notion of a KRI is particularly aligned with measuring and managing risk as part of achieving an organization's strategic objectives.