Section: Volume D

Key risk indicators (KRIs) are metrics used by organizations to monitor and assess potential risks that may impact their objectives and performance. KRIs also provide early warning signals that help organizations identify, analyze, and address risks before they escalate into significant issues1. The most important factor to understand when developing KRIs is stakeholder requirements, which are the needs and expectations of the persons or entities that have an interest or influence in the organization's risk management2. By understanding stakeholder requirements, the organization can ensure that the KRIs are aligned with the organization's strategy, vision, and mission, and that they reflect the current and emerging risks and their potential consequences. Understanding stakeholder requirements can also help to establish and communicate the roles and responsibilities of the stakeholders, and to enforce the accountability and performance of the risk management. KRI thresholds, integrity of the source data, and control environment are not the most important factors to understand when developing KRIs, as they do not provide the same level of insight and relevance as stakeholder requirements. KRI thresholds are the values or ranges that indicate the level of risk exposure and the need for action or escalation3. KRI thresholds can help to measure and monitor the performance and compliance of the risk management, but they do not ensure that the KRIs are appropriate and accurate for the organization's risk profile. Integrity of the source data is the quality and reliability of the data that are used to support or enable the development of KRIs4. Integrity of the source data can enhance the validity and consistency of the KRIs, but it does not ensure that the KRIs are comprehensive and compatible with the organization's risk environment. Control environment is the set of policies, processes, and systems that provide the foundation and structure for the risk management5. Control environment can improve the security and efficiency of the risk management, but it does not ensure that the KRIs are relevant and realistic for the organization's risk objectives and strategies. References = 1: Key Risk Indicators: A Practical Guide | SafetyCulture2: Stakeholder Requirements - an overview | ScienceDirect Topics3: Risk Threshold: Definition, Meaning & Example - PM Study Circle4: Data Integrity - an overview | ScienceDirect Topics5: Control Environment - an overview | ScienceDirect Topics : [Risk and Information Systems Control Study Manual, Chapter 4: Risk and Control Monitoring and Reporting, Section 4.1: Key Risk Indicators, pp. 181-185.] : [Risk and Information Systems Control Study Manual, Chapter 5: Information Systems Control Design and Implementation, Section 5.1: Control Design, pp. 233-235.] : [Risk and Information Systems Control Study Manual, Chapter 5: Information Systems Control Design and Implementation, Section 5.2: Control Implementation, pp. 243-245.] : [Risk and Information Systems Control Study Manual, Chapter 5: Information Systems Control Design and Implementation, Section 5.3: Control Monitoring and Maintenance, pp. 251-253.]

Explanation/Reference:
Explanation:
Segregation of duties (SOD) is a key component to maintaining a strong internal control environment because it reduces the risk of fraudulent transactions. When duties for a business process or transaction are segregated it becomes more difficult for fraudulent activity to occur because it would involve collusion among several employees.
Incorrect Answers:
A: An RMIS can be a very effective tool in monitoring all risk factors that impact the enterprise. The danger is that many important classes of risk may be omitted from consideration by the system. hence it doesn't ensure strong internal control environment.
C: Manual controls usually not form strong internal control environment. By not automating SOD controls, there is, potentially, the issue of these controls becoming a barrier in serving the customer. As manual authorizations are often time consuming and require another step in any business process, this takes time away from serving the customer.
Automated compliance solutions aim to provide enterprises with timely and efficient internal controls that do not disrupt their normal business process.
D: It is not directly related in maintaining strong internal control environment. The automated tools are typically used to address SOD and also to provide the enterprise with reporting functionality on SOD violations (i.e., detective controls) and to put in place preventive controls.