What is Key Risk Indicator ? How to measure KRIs

If there’s one challenge that every cyber security professional constantly considers, it’s establishing vigilant oversight and strategically responding to potential threats. Quite often, security teams go the extra mile to strengthen their security posture to avert risk or, at the very least, respond effectively enough to minimize damage. However, that is just not enough.

No effort in this regard can be successful without strong Key Risk Indicators (KRIs). A KRI measures the degree of potential risk in an activity. KRIs serve as an early warning that your organization’s risk profile is expected to change, and you need to step up monitoring.

In this article, we will explore the role of cyber security KRIs, how to implement the right ones, and other key best practices.

TL;DR

A KRI reliably measures the degree of potential cyber security risk to your business.

KRI development begins with risk area identification and seamlessly integrating the measure with your risk management processes.

KRIs show the outcome of something, while KPIs show the progress of an action or task.

What is a Key Risk Indicator (KRI)?

A KRI is a metric used to gauge the likelihood that an event, along with its potential impact, will surpass the organization’s risk tolerance and significantly hinder its success.

KRIs, backed by risk appetite statements and the organization’s risk management strategy, act as early warnings for potential risks in different areas of the enterprise. They help assure stakeholders that risks can be monitored and quickly mitigated.

KRIs are typically grouped into 3 main categories:

Three main categories of KRIs

• Operational Indicators: These identify risks arising from day-to-day activities.
• People Indicators: evaluate employee and customer satisfaction, talent retention, and more.
• Financial Indicators: These metrics help calculate risks related to the market, competition, or regulatory changes.

Most organizations have various ways to flag and block risks, including risk scoring and quantification. 

For example, prompt notifications when a user plugs a USB into a work device can prevent a data breach.

Why Are KRIs Important?

KRIs help an organization keep a close watch on potential risks, monitor changes to its profile, and act in advance to ward off threats and data breaches that could harm its operations and reputation.

Simply put, 

A Lack of Warning = A Lack of Value

Take a glimpse of the importance of KRIs:

• KRIs serve as early warning signals for potential risks
• They enable organizations to identify and address issues before they escalate
• KRIs provide measurable data to monitor and assess risk levels
• They help stakeholders make better decisions based on risk insights
• KRIs contribute to developing strategies to mitigate identified risks
• They complement other risk management tools and processes for risk oversight
• KRIs provide assurance to stakeholders that risks are being monitored and managed

From Subtle Signs to Strong Indicators: Developing Effective KRI

Good risk indicators are a need of the hour for businesses to build a thorough risk assessment plan. 

Without established KRIs, your company may encounter issues that could severely impact its business and operations. Here are steps to develop one tailored to your goals:

1. Identify Key Risk Areas

Just like any approach to managing risks, KRIs should be customized to fit your unique risk profile and address the most significant threats. Hence, this step is all about underscoring critical areas of risk affecting your operations.

Some compliance Key Risk Indicators examples include:

Parameters	Risks	Measurable KRIs
Data Security	Risks related to data breaches, unauthorized access, and data loss	Track the number of data breaches reported in a specific period.
Compliance	Adherence to regulations like GDPR, CCPA, and industry standards	Track the number of violations or non-conformities found in compliance checks.
Operational Reliability	System uptime, downtime, and performance issues	Measure the percentage of time the system is operational and available.
Vendor Management	Risks from third-party cloud service providers	Track the number of issues or incidents arising from third-party vendors.
Financial Stability	Cost overruns, budget adherence, and financial health	Track the percentage by which actual costs exceed the budgeted costs.

2. Guage The Impact of The Risk Areas

It’s important to understand how each risk affects your business. This means assessing the potential losses if certain risks were to occur, figuring out which ones are most likely to happen, and estimating the damage they would cause.

For example, this is how the impact would look like:

Parameters	Risks
Data Security	If there’s a breach, it could damage customer trust, lead to legal issues, and lead to hefty fines.
Compliance	Not following rules could result in fines, legal trouble, harm your reputation, and cause you to lose business opportunities
Operational Reliability	Downtime might disrupt how you work, upset customers, and make you lose money
Vendor Management	Problems with your suppliers could hurt your service, your reputation, and how smoothly your business runs
Financial Stability	If you go over your budget or have financial problems, it might strain your resources, limit your investments, and slow down your growth plans.

3. Select Relevant Metrics or, Better Yet, KRIs

Once you’ve figured out which risks are most important based on your business goals and how much they could affect you, it’s time to pick the right indicators. 

This step ensures that the process is practical and effective. You might also want to check out your organization’s Key Performance Indicators (KPIs), as these can provide helpful information. 

As things change, make sure to carefully look over all your current metrics. 

• How often you do this will depend on what kind of industry you’re in.
• Any changes inside or outside the company
• Your big goals and other objectives

But it should happen at least once a year. So, Do a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) for the whole organization to find, look at, and write down what’s going on with how your organization works and how much risk it’s willing to take.

For example, the metrics can be:

Metrics	Risks
Data Security	Number of security incidents, frequency of vulnerability scans, and compliance with security policies
Compliance	Number of compliance audits passed/failed, regulatory fines, and adherence to compliance deadlines
Operational Reliability	System uptime percentage, mean time to recovery (MTTR), and number of unplanned outages
Vendor Management	Vendor performance scores, SLA adherence rates, and frequency of third-party risk assessments
Financial Stability	Cloud cost as a percentage of total IT budget, cost variance from the budget, and ROI on cloud investments

4. Set Thresholds and Triggers

First, you need to figure out what levels of risk are okay for each KRI. These are your thresholds. When a KRI hits one of these thresholds, it’s a warning light—it tells your team that something might not be right.

If a KRI keeps going over these limits, it’s a clear sign that something needs attention. It could mean your business practices are too risky, or maybe the KRI itself needs a tweak. Either way, it’s a signal that you should dig deeper and find out what’s going on. 

5. Regular Review and Update

You should take a look at your KRIs every now and then to make sure they still make sense and are doing their job well. This means checking if they’re still relevant and helping you spot potential problems.

Over time, you notice that new cyber threats are emerging or your company is adopting new technology that could affect data security. In this case, you might update your KRI to include monitoring for these new threats or adjusting the threshold for what constitutes a security incident.

6. Integrate with Risk Management Processes

Last but not least, you need to integrate the KRIs into your company’s broader risk management framework. It may seem like a puzzle, but it helps you see the complete picture of your business’s risk landscape.

With this step, you’ll have KRI data to guide risk assessments, mitigation strategies, and decision-making processes, and you’ll be making informed choices backed by solid information.

However, to achieve this, you need a strong platform that supports integrated risk management. At Sprinto, we help you understand the real impact of security risks using trusted industry benchmarks. This helps you tackle risks with confidence, prioritize well, and handle them methodically. 

Basically, you’re not dismissing risks too early and avoiding overloading yourself. Instead, you keep your risk management balanced.

On top of that, good risk management involves assessing risks with solid data and comparing them to industry norms. 

Watch this video to know how it works

KRIs vs KPIs: What’s the Difference?

Both KRIs and KPIs track events regularly, like daily, weekly, or monthly. However, KRIs show the outcome of something, while KPIs show the progress of an action or task. When you use both together, you get a complete view of your contact center from all angles.

KRIs (Key Risk Indicators)	KPIs (Key Performance Indicators)
Measures potential risks that could impact the business negatively.	Measures the performance and success of business objectives.
Used to monitor and mitigate risks proactively.	Used to track progress toward achieving strategic goals.
Focuses on identifying early warning signals for risks.	Focuses on quantifiable metrics related to business performance.
Key risk indicators examples: Number of security incidents, compliance audit results, downtime incidents.	Examples: Revenue growth rate, customer satisfaction score, and sales conversion rate.
Helps in decision-making related to risk management and mitigation strategies.	Helps in decision-making related to business performance improvements and goal attainment.

Challenges of Creating and Measuring New KRIs

Managing the challenges of creating and measuring new Key Risk Indicators (KRIs) involves thoughtful planning and strategy. With that being here are the top 3 challenges you’ll face while measuring new KRIs.

Identifying Relevant Risks

Determining which risks are critical to monitor can be difficult, especially in dynamic environments.

Hence, you need to conduct thorough risk assessments and engage with stakeholders to identify key areas of concern.

Defining Measurable Indicators

Developing KRIs that are specific, measurable, and aligned with business objectives is often complex.

Define indicators using a SMART (Specific, Measurable, Achievable, Relevant, Time-bound) approach.

Continuous Monitoring and Updating

Risks evolve over time, necessitating continuous monitoring and periodic updates of KRIs. Establish a regular review process to update KRIs based on the latest risk environment and business changes.

Technology in Effectively Measuring and Managing KRIs

In my work with clients, our first step is to identify what the business wants to achieve. From there, we create KPIs to track performance and ensure we’re on track to meet those goals. We also identify potential risks associated with each goal and develop KRIs to monitor these risks closely. 

These KRIs act as an early warning system, giving us a heads-up when the business might face challenges in reaching its objectives.

Now, Sprinto comes in to help you monitor and manage these risks continuously.

Sprinto improves your process by helping you thoroughly analyze risks and understand their precise impact. It integrates with your cloud systems to pinpoint vulnerabilities and configuration errors accurately. 

This ensures you accurately assess risks without overestimating or underestimating, which builds a trustworthy risk inventory. With a strong risk register and trusted industry benchmarks, Sprinto enables deliberate assessment and management of security risks, promoting informed decision-making to help you set your KRIs and monitor them to perfection.

Interested? Get on a call with us to know more!

FAQs

What criteria should be used to select KRIs? 

When selecting KRIs, it’s important to consider relevance to strategic objectives, measurability, reliability of data sources, sensitivity to changes in risk levels, and alignment with risk appetite and tolerance levels of the organization.

How often should KRIs be reviewed? 

KRI reviews need to be held on a quarterly basis to ensure a close watch on your risk profile. The frequency of review may vary based on the nature of the risk, industry regulations, and changes in business conditions.

How can KRIs be integrated into existing risk management frameworks?

KRIs can be integrated into risk management frameworks by aligning them with strategic goals, incorporating them into risk assessment processes, using them to inform decision-making, and ensuring they are supported by appropriate data analysis and reporting mechanisms.