What is a characteristic of key risk indicators (KRIs)?

Key risk indicators (KRIs) are essential tools in risk management that signal the need for change in risk exposure. They help organizations monitor potential risks and provide early warning signals that suggest if the level of risk is increasing or if current risk management practices are no longer sufficient. By actively tracking KRIs, organizations can make informed decisions to adjust their strategies or controls in response to emerging risks, thereby enhancing their overall risk management framework.

In contrast, other options may misunderstand the nature and application of KRIs. For instance, while some metrics can provide historical perspectives on risk, the primary function of KRIs is to act as leading indicators rather than merely reflecting past performance. Additionally, KRIs are relevant across various sectors, not just limited to financial industries, making their application broad and versatile. Lastly, KRIs should be dynamic, adapting to changing risk landscapes, rather than being static and unchanging, which would defeat their purpose of providing proactive risk insights.