What does reliability of a key risk indicator (KRI) indicate?

Reliability of a key risk indicator (KRI) refers to its ability to consistently provide accurate and useful information regarding risk levels within an organization. A KRI that is reliable is one that flags exceptions and anomalies whenever they occur, notifying stakeholders or decision-makers about potential risks in real-time. This immediate identification of exceptions is crucial because it allows for timely intervention and decision-making, helping organizations to address emerging threats before they escalate into more significant issues.

While it is beneficial for a KRI to perform within appropriate thresholds, test targets, or initiate corrective actions, those aspects do not directly reflect the reliability of the indicator itself. Reliability primarily focuses on the consistency and accuracy of the KRI in monitoring and reporting risks, which specifically involves its capability to flag exceptions accurately as they happen.