Season 2 | Ep. 34: KRI Reporting and Analytics Consumption

In the latest episode of the Risk Intel Podcast, Claire Jordan, SRA Watchtower’s Vice President of Product joins host Ed Vincent to explore the critical role of how Key Risk Indicators (KRIs) can enable risk-informed strategic and operational decisions within financial institutions. The episode dives into the nuances of how different stakeholders consume KRIs and how effective dashboards and reports can increase communication and drive a more reliable decision making process.

This is part four and final episode of our Evolving Your ERM Program series. If you missed any prior episodes, please click below to catch up.

• Setting the Standard: Building a Baseline of Key Risk Indicators for Financial Institutions
• Collecting More Timely and Frequent Data
• Why Quantitative Benchmarks Lead to Actionable Insights

Understanding the Three Lines of Defense in Risk Management

Claire begins by breaking down the three lines of defense within financial institutions and how each line interacts with KRIs:

1. ‍First Line of Defense: This group includes department heads and other tactical-level managers. They need detailed visibility into their department's KRIs but require filtered information to avoid unnecessary noise. By focusing on department-specific KRIs, these managers can make informed decisions without getting distracted by irrelevant data that doesnt apply to their scope of responsibilities.
2. ‍Second Line of Defense: The second line, typically the Chief Risk Officer (CRO) and risk teams, requires a holistic view of organizational risk. This broader perspective allows them to identify systemic and emerging risks, as well as educate the organization on managing these risks effectively.
3. ‍Third Line of Defense: This group, including the Board of Directors and audit/risk committees, needs high-level, aggregated data. Their role is to oversee the institution's alignment with its risk appetite and ensure strategic decisions are informed by accurate risk assessments.

Each line of defense needs a different level of visibility. There are three very different use cases and different ways to consume the KRI data across an organization. 

Dashboards vs. Reports: How to Consume KRIs Effectively

Claire and Ed also discuss the difference between dashboards verse reports. A report provides a static snapshot of data at a given point in time. They are ideal for presenting information in a clear, concise format, often used for regulatory reporting or board presentations.

“That [reports] could be varying levels of data … it could be high level, it could be more tactical, but it’s a picture, it’s a snapshot of time”.

Dashboards, however, are dynamic risk tools that allow users to interact with the data. Stakeholders can drill down into specific KRIs, pivot data to export trends, and make real-time decisions based on emerging patterns.

Key Characteristics of Effective Dashboards and Reports:

• ‍Permissioning: Both dashboards and reports must be designed with permissioning in mind to ensure users only have access to the data relevant to them, reducing noise and protecting confidential information.

“Being able to restrict the information that is shared between teams again eliminates noise, but could also keep confidential information within the circle that it should be kept”

• ‍Filtering: The ability to filter data is crucial for both dashboards and reports. This flexibility enables users to focus on critical areas, such as risks exceeding the institution’s appetite, and to understand the underlying causes of trends. Filtering can be useful for both reports and dashboards to eliminate noise and really drill down on specific KRIs.
• ‍Configuration and Supporting Information: Effective dashboards often include justifications and summaries that provide context to the data, helping stakeholders understand why certain KRIs are behaving in a particular way. Configuration is typically seen within just dashboards, it allows the ability to view charts and graphs, while including some supporting information as well. Using dashboards to present and view your data can really help stake holders make informed decisions.

The Future of KRIs: Moving from Hindsight to Foresight

As the conversation progresses, Claire and Ed discuss the importance of using KRIs not just for analyzing past performance but for predicting future outcomes based on trends. This forward-looking approach, enabled by scenario modeling and hypothetical event analysis, allows institutions to anticipate potential risks and adjust their strategies accordingly.

Scenario Modeling in Watchtower:

Watchtower’s scenario modeling feature lets stakeholders explore the potential impact of various external and internal factors, such as economic changes or strategic shifts. This capability is crucial for proactive risk management. Different stakeholders—whether in the first line managing day-to-day operations or the third line overseeing strategic direction—can use scenario modeling to inform their decisions, ensuring a comprehensive risk management strategy.

“Good reporting and good dashboarding doesn’t just show you the data, it will also help you decide what’s next” - Claire Jordan

Conclusion

This episode of the Risk Intel Podcast offers valuable insights into the consumption of KRIs across different levels of an organization. By understanding the distinct needs of each line of defense and leveraging dashboards and reporting tools like a holistic risk intelligence platform can offer, financial institutions can make more informed, risk-aware decisions. As the landscape of risk management evolves, integrating these best practices will be crucial for staying ahead of potential risks and aligning with regulatory expectations.