Use KRIs To Create An Early Warning System 

During the lazy days of Summer, companies or organizations tend to slow down.   People   go on vacation, customers or vendors go into Summer mode, organizations think less about  risk management and more about company picnics or other fun events. People start thinking more about vacations and less about reality.  When companies least expect things to go wrong they sometimes do. Not only do minor things go wrong but major crises tends to pop up, threatening the existence of the corporation itself!  Companies are not only blindsighted when a crisis happens  but sometimes they are completely unprepared.

A crisis is defined as a major unpredictable event that has potentially negative or catastrophic results.  In today's business climate, where the culture of attack looms over any corporation that is unfortunate enough to receive bad publicity, companies cannot afford to conduct business without a proper crisis management plan in effect. Remember, unlike twenty years ago, a company can no longer handle a crisis by issuing a simple PR statement or marketing statement.  A full fledged crisis management operation is usually required.

When a crisis happens people are often caught off guard.  Some don’t even prepare for crisis or are blissfully unaware of the  crisis lurking outside.  And in the case of cross-border crisis, they  are of course harder to manage than  pure domestic ones.  As international commerce and business adds an additional layer of complexity to any crisis situation, cultural and communication issues become front and center to any crisis management plan.

Therefore, when considering a crisis management plan, it helps to be proactive.  It helps to identify potential crisis scenarios and prepare for the worst by running simulations.  How will the company handle major crisis such as injury or death caused by its products?  Or how will the company handle a  media crisis resulting from the theft of its IP or customer data?  Sometimes, however, it may be harder to identify areas of potential crisis.  When that happens, I recommend that a company seriously considers developing effective, high-quality key risk indicators ( KRIs) that can provide metrics on risk exposure and early warning indicators.

KRIs , if developed properly can be used as an early warning system that may prevent crisis before they happen or at least warn the company in time of a potential crisis.  That way, a company may be able to take proactive steps prior to a crisis to contain it or even prevent it. Examples of KRIs includes:

1. A review of industry data showing incidents and losses throughout the industry ( if it happened to a competitor, it might happen to you) that could have an impact on your company as well.
2. A review of actual losses and incidents in the company. How many product failures did the service department report?  Check to see if your company has loss event databases that could provide input on the kinds of events that could cause major losses.
3. A review of regulatory standards in your industry.  Regulatory standards can give you an idea of the policies and regulations that govern your business activities and the underlying reasons why.
4. Risk assessments- what risk assessments have been already done?
5. A look at historical data.  Historical data could give you an insight into expected losses.
6. Stakeholder requirements- what are the requirements and expectations of your stakeholders?  Especially in a crisis?  Perhaps you can use these requirements when confronting a crisis or in developing an early warning system.

Once you have obtained these reports ( note they are data intensive) you have the beginning of KRIs and a good early warning system.  Create a dashboard on your computer tailored to providing you with a picture of potential risks that could result in crisis.  The dashboard can provide an excellent early warning system as to certain events that may result in a potential crisis. Remember, some crisis can be avoided if proper steps are taken before an incident evolves into a mega-crisis.

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