What do key risk indicators (KRIs) signify in risk management?

Key risk indicators (KRIs) are important tools in risk management because they provide early signals of potential increases in risk exposure. By monitoring specific metrics, organizations can identify trends or changes that may indicate heightened risk, allowing them to respond proactively before the risks escalate into larger issues.

The function of KRIs is to help organizations track the status of various risks aligned with their objectives. This allows for better decision-making and can improve the overall effectiveness of risk management strategies. By focusing on early warning signals, entities can implement risk mitigation techniques more effectively and timely, thus protecting assets and enhancing performance.

The other provided choices focus on unrelated areas: measuring employee performance, financial reporting metrics, and determining market share growth, none of which align with the core purpose of KRIs. This clarity solidifies that KRIs are specifically tailored for understanding and managing risks rather than operational or performance metrics in other business areas.