A balanced operational risk monitoring framework requires a combination of both leading and lagging indicators to maintain full visibility over the operating environment.
  ┌────────────────────────────────────────────────────────┐
  │              PREDICTIVE LEADING INDICATORS             │
  │   • System Patch Latency Delay (Days)                  │
  │   • Staff Unscheduled Absenteeism Rate (%)            │
  └───────────────────────────┬────────────────────────────┘
                              ▼
                        [PROCESS LAYER]
                              │
                              ▼
  ┌────────────────────────────────────────────────────────┐
  │              HISTORICAL LAGGING INDICATORS             │
  │   • Actual Gross Financial Loss Payouts ($)            │
  │   • Total Volume of Customer Complaints Logged (#)     │
  └────────────────────────────────────────────────────────┘

Leading Risk Indicators
Leading indicators are predictive metrics that measure conditions or drivers that historically cause operational failures. By monitoring these leading signals, risk teams can identify vulnerabilities and implement corrective controls before an actual incident occurs.
Lagging Risk Indicators
Lagging indicators are retrospective metrics that measure the actual outcome or impact of past operational failures. While lagging indicators do not prevent incidents, they provide definitive evidence of control breakdowns, help confirm the accuracy of leading indicators, and provide the data required to calculate regulatory operational capital.
 
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