Set Up Risk Indicators as an Early Warning System and Leverage Actionable Reports for Risk Monitoring

  • by Frank Rambo, PhD, Director, Customer Solution Adoption (CSA), EMEA
  • March 21, 2011
A risk monitoring framework delivers actionable alerts and reports that support decision makers in managing risk responses. It includes automated key risk indicators (KRIs) that trigger early warnings, meaningful reports of the current risk status, and records of risk incidents and losses as lessons learned. Learn how to set up KRIs in SAP BusinessObjects Risk Management 3.0 and define criteria to trigger follow-up actions. Use pre-delivered Crystal Reports to respond to frequent management questions regarding the organization’s risk status and record your risk incidents and losses in an incident and loss database.
Key Concept
Key risk indicators (KRIs) are implemented in a top-down approach and based on queries or Web services that are available in your business systems or developed by your company. You start with KRI templates at an early point in time where implementation details such as required queries and system connectors aren’t yet available. KRI templates provide a logical grouping for KRI implementations of a similar kind and contain descriptions in business, but not in technical terms. KRI implementations contain the technical details (e.g., system connectors and script names).

Risk monitoring is the key result of the enterprise risk management (ERM) process as it provides information that risk managers and decision makers can use to communicate risk information and determine where to allocate resources most effectively. SAP BusinessObjects Risk Management 3.0 includes a comprehensive framework for risk monitoring, including:

  • Automated monitoring of key risk indicators (KRIs) as an early warning system for aversive trends in your risk environment
  • Online reports using SAP Crystal Reports technology to support management decisions with actionable reports on your current risk status
  • Incident and loss database (ILDB) to record risk incidents and their effective losses as lessons learned, and better predict risk exposure and anticipate losses
Note
For a high-level overview of SAP BusinessObjects Risk Management 3.0 and more details on risk planning, risk identification, initial risk analysis, and risk response allocation refer to my other articles posted to the GRC Expert knowledgebase.

Early Warnings from KRIs

KRIs are critical to the successful management of enterprise risks. Essentially, you use KRIs to monitor and predict events within your organization that may threaten its strategic objectives. In combination with escalation criteria, KRIs help educate management about emerging issues. They also help keep the risk management process dynamic and risk profiles current. KRIs are different from key performance indicators (KPIs) in that KRIs monitor forward-looking trends that make a risk event more likely to occur, whereas KPIs are typically historically focused and tied to a balanced scorecard.

Frank Rambo, PhD

Frank Rambo, PhD, is managing a team within SAP’s Customer Solution Adoption (CSA) organization working with customers in the SAP analytics area with the objective to drive adoption of new, innovative solutions. Prior to this position, he worked eight years for SAP Germany as a senior consultant focusing on SAP security and identity management. Before he joined SAP in 1999, Frank worked as a physicist in an international research team. He lives in Hamburg, Germany.

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