Guide on Key Risk Indicators (KRIs)

Overview:
Key Risk Indicators (KRIs) are critical predictors of unfavorable events that can adversely affect the objectives of a project or an organisation. They assist in detecting the risk exposure of an organization and help in informing the necessary actions to be taken.

Importance:
KRIs are important as they provide an early signal of increasing risk exposure in various areas of the enterprise. It's an important tool used to fulfil the strategic goals of an organization in line with its risk policy. Moreover, it provides a proactive approach to risk management.

How It Works:
KRIs work by quantifying the risk probabilities within different indicators. These indicators are selected based on their ability to predict an event which might be harmful to some processes in an organization. They generate data which is further used in making decisions.

Exam Tips:
For questions on KRIs, always focus on the significance of each key risk indicator and how they could impact an organization negatively. Remember the process of how it works, starting with the identification of risk indicators, quantifying them, and using that data in decision making. It's also important to remember their role in proactive risk management.

Answering Questions on Key Risk Indicators (KRIs):
When answering questions, discuss KRIs as potential predictors of harmful events. Show a deep understanding of how they are quantified and applied in various scenarios. Always emphasize their role in proactive risk management and how they can help an organization avoid or mitigate unfavorable outcomes.