Even though many organisations use the terms Key Performance Indicators (KPIs) and Key Risk Indicators (KRIs) interchangeably, they actually are two different tools with different purposes. Let’s take a look at what they are and how they are different.
Key Performance Indicators (KPI)
Key Performance Indicators (KPIs) are the gauges and measurements an organisation uses to understand how well individuals, business units, projects and companies are performing against their strategic goals.
Once an organisation has identified its strategic goals, KPIs serve as monitoring and decision-making tools that help answer your organisation’s key performance questions.
For more information on KPIs you can:
Key Risk Indicators (KRI)
Key Risk Indicators (KRIs), as the name suggests, measure risk. KRIs are used by organisations to determine how much risk they are exposed to or how risky a particular venture or activity is.
KRIs are a way to quantify and monitor the biggest risks an organisation (or activity) is exposed to. By measuring the risks and their potential impact on business performance, organisations are able to create early warning systems that allow them to monitor, manage and mitigate key risks.
Effective KRIs help to:
The relationship between KPIs and KRIs
While KPIs help organisations understand how well they are doing in relation to their strategic plans, KRIs help them understand the risks involved and the likelihood of not delivering good outcomes in the future. This means KRIs can be the flipside or KPIs.
Here are three examples that illustrate this relationship:
So, in a nutshell:
KPIs and KRIs are not the same. KRIs help to quantify risks, while KPIs help to measure business performance.
Where to go from here:
Bernard Marr is a bestselling author, keynote speaker, and advisor to companies and governments. He has worked with and advised many of the world's best-known organisations. LinkedIn has recently ranked Bernard as one of the top 10 Business Influencers in the world (in fact, No 5 - just behind Bill Gates and Richard Branson). He writes on the topics of intelligent business performance for various publications including Forbes, HuffPost, and LinkedIn Pulse. His blogs and SlideShare presentation have millions of readers.