This post depicts the relationship of the risk assessment matrix (RAM) and the Key Indicator Matrix (KIM) with one embedded within the other. It clearly demonstrates how the two matrices are related by risk aversion and the mitigation of such risk for clients. This matrix builds off a previous post regarding the RAM and KIM matrices but that post dealt with more of the statistical aspects of the methodologies.

The above matrices demonstrate how RAM deals with risk and probability of rule non-compliance while KIM deals with the distinction between medium rule non-compliance with a low compliant and a high compliant group in a more predictive fashion. The key element here is for risk aversion and to reduce risk as much as possible. Please refer back to the previous post which depicts how RAM and KIM which measure effectiveness and efficiency respectively in a differential monitoring approach as suggested through the Regulatory Compliance Theory of Diminishing Returns (TRC+). This is a delicate balancing act in determining the most effective and efficient approach utilizing the two methodologies. The purpose of the above table is to show the relationship between the two methodologies.