Explanation:
Key Risk Indicators (KRIs) are metrics used by organizations to provide an early signal of increasing risk exposure in various areas of the enterprise, identifying potential threats that may prevent the achievement of strategic objectives. In contrast, Key Control Indicators (KCIs) are metrics used to measure the effectiveness of the control environment and mitigation mechanisms implemented to manage those risks. Therefore, KRIs measure the risk itself, while KCIs evaluate the controls in place.
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Q.28 John, the Chief Risk Officer of Omega Bank, is implementing a new risk control system. As part of this system, he introduces Key Risk Indicators (KRIs) and Key Control Indicators (KCIs) to monitor risk levels and control effectiveness, respectively. However, some of his team members are confused about the differences between these two types of indicators. Which of the following statements best differentiates between KRIs and KCIs?
A
Both KRIs and KCIs measure the potential risks that may impact the achievement of strategic objectives.
B
KCIs identify potential risks, while KRIs measure the effectiveness of control mechanisms in mitigating those risks.
C
Both KRIs and KCIs monitor the effectiveness of risk control mechanisms.
D
KRIs identify potential risks that may hinder the achievement of an objective, while KCIs measure the effectiveness of mitigation mechanisms.
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