Definition of Bottom-Up KRIs
Bottom-Up Key Risk Indicators (KRIs)areidentified at the operational level, focusing onlocalized riskswithin business units.
They aretied to actual internal loss eventsandreported frequently (daily, weekly, or monthly)to capture ongoing trends.
Key Properties of Bottom-Up KRIs
Selected by local management→ Ensuresrelevance to specific business areas.
Tied to internal loss events→ Helps intracking risk patterns within specific legal entities, countries, or business units.
Reported frequently→ Allows fortimely risk detection and mitigation.
Why Answer D is Correct
Bottom-up KRIs focus onlocalized risk exposureand aremonitored frequentlyto track operational changes.
Why Other Answers Are Incorrect
Option
Explanation
A. Seated by senior management: tied to internal loss events at the legal entity, country, business, and/or product level, reported daily, weekly, or monthly.
Incorrect–Senior management sets top-down KRIs, while bottom-up KRIs are managed locally.
B. Selected by local management, based on key controls or weaknesses identified by audit reports, reported quarterly.
Incorrect– While audit reports are useful,bottom-up KRIs are based on loss events, not just audit findings.Quarterly reporting is too infrequent.
C. Are not used due to changes in regulations.
Incorrect– Bottom-up KRIs remain essential despite regulatory changes.
PRMIA Risk Indicator Best Practices
Basel Committee’s Risk Measurement and Reporting Guidelines
PRMIA References for Verification
