Key control indicator
(KCI).
A measure derived from a risk budget and key risk indicators, for the purposes of control.
Example
A Inc operates in the capital goods sector and regularly makes tenders in foreign markets. The tenders are based on foreign exchange rates prevailing at the time of bid but there is risk in the tenders which is difficult to hedge because there is uncertainty over whether the tenders will be accepted.
A Inc measures the number of bids outstanding and other key factors including the volatility of the currency pairs involved in the tenders to produce an overall measure of risk for tenders. The risk in tenders is then given a budget for overall risk, which is managed by the tendering team and their treasury colleagues.
A Inc converts this budget to a key control indicator, adding up maximum exposure to any one currency pair, adjusted for volatility (and time) to meet the risk budget requirements.
