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Determine Whether Your KRIs are Leading or Lagging Indicators For Better Compliance Planning

By Robert Zelinsky Robert Zelinsky on July 19, 2019

Are your KRIs actually protecting your company? Or are they just giving you a false sense of security?

In this article, we’ll examine how to develop the right KRIs to identify, assess, and predict compliance risk with expert accuracy. We’ll look at leading and lagging indicators and why it’s important to have real-time intelligence and insights for good decision-making.

Leading and Lagging Indicators

First, you’ll need to understand the role of leading and lagging indicators in your risk-based approach. KRIs can, themselves, be leading or lagging indicators of risk. For example, a KRI may be leading if it doesn't identify a specific instance of non-compliance, but shows a pattern of activity indicative of potential future risk.


In the world of risk management and compliance, a leading indicator typically utilizes existing metrics to identify issues before they happen. For example, if sales representatives in a specific region consistently fail to attend or perform poorly on compliance training tests, that’s a leading compliance risk indicator that this region may present a higher compliance risk. A leading indicator is input-oriented; it assesses current performance and predicts how that might impact future success. 


Lagging indicators, on the other hand, look at past performance to analyze what happened and to prevent it in the future. For example, if sales representatives in a specific region have consistently exceeded meal spend thresholds in violation of company compliance policies, that’s a lagging compliance risk indicator that this region presents a higher compliance risk. A lagging indicator is output-oriented; it assesses past performance to measure success to date. 


To review the examples provided above, the use of compliance training metrics as leading indicators of compliance risk tells organizations which regions may present a higher compliance risk due to, for example, lack of comprehension regarding compliance policies. Utilizing historical meal spend threshold data as lagging indicator, on the other hand, tells organizations which regions do present a higher compliance risk by highlighting actual instances of compliance policy violation.


Here’s how this plays out in a typical company. The Wall Street Journal’s Risk & Compliance Journal found that when a company’s employee surveys show a lax attitude toward compliance habits, this is a leading indicator that the company is at risk of a compliance failure. The lagging indicators are the failure events that have already occurred, which the company should analyze more deeply to improve their compliance program.

Indicators of Risk and Internal Review and Response

Leading indicators of risk may help inform your organization where, over the next year, additional resources should be deployed for training and monitoring, as signals show there is a risk for future non-compliance. Lagging indicators can provide insight into key compliance remediation/disciplinary needs and areas that are at a potential risk of regulatory scrutiny.


Understanding this about your KRIs can affect how you take a data-informed approach to the key tasks recommended by the U.S. Office of the Inspector General (OIG). 


There is a rather substantial list of key tasks the OIG recommends. These include:


  1. Disseminating regulatory guidance material
  2. Publicizing your reporting system to all workforce members, vendors, and agents
  3. Monitoring for violations of laws and regulations
  4. Conducting organizational risk assessments
  5. Developing a work plan based on your risk assessments
  6. Maintaining a hotline-style reporting system for noncompliance
  7. Responding to compliance concerns expressed by employees 
  8. Establishing procedures for monitoring adherence
  9. Conduct compliance audits
  10. Analyzing compliance audit results
  11. Developing an annual compliance audit plan
  12. Evaluating audits by external entities
  13. Monitoring retaliation
  14. Getting proper legal representation
  15. Using objective and independent auditing methodologies consistent with circumstances
  16. Reacting to compliance issues in a timely manner


That’s a big list. Is your company currently capable of accomplishing these 16 complex tasks on an ongoing basis? If not, you may need the help of a global compliance and risk management company and a digital compliance platform.

Real-Time Intelligence and Insights

An effective compliance program hinges on access to reliable data. A real-time window into your actual performance drives good-decision making and fast response times to compliance incidents. 


Here are some examples of using real-time insights, along with leading and lagging indicators, to minimize risk.



See when physicians and providers have excessive spending, and work with them to halt it. A leading indicator would provider spending that is nearing a monthly threshold for providers of that type. A lagging indicator would be a provider that has already exceeded the maximum for the month.



When speakers are nearing internal caps, warn them before they exceed it. A leading indicator would be a relative increase in speaker-related spend compared to a previous year. A lagging indicator would be a speaker spending cap that has already been exceeded.



Prevent consulting fees from getting out of hand by monitoring expenditure limits. A leading indicator would be a higher spend than other comparable regions. A lagging indicator would be a consultant payment that exceeds defined limits.



Monitor event spending by sales rep and aggregate by attendee. A leading indicator would be an increase in spending compared to last year’s event. A lagging indicator would be finding inappropriate attendees at events.


Total Spending

Manage total spending for speaker boards, meals, travel, and more. A leading indicator would be an overall increased spend compared to this time last year. A lagging indicator would be discovering that this month exceeds the overall budget limit.


By monitoring all of these activities in real time, you’ll prevent delays in responding effectively. For example, things like meal and travel expenses aren’t traditionally easily calculated until the end of the month. 


Compliance software removes the lag time. Instead of allowing meal and travel expenses to grow to outrageous levels over the span of a month, you’ll see overages immediately and can put a stop to them.

Expert Compliance Tools

If your company is ready to implement a global risk management solution, let’s talk. Cresen Solutions provides a world-class compliance platform with innovative auditing, monitoring, and analysis tools.


Here’s a look at the types of Cresen tools that help you develop good KRIs to identify and minimize compliance risks.

Managing Data

Data EZ is a powerful cloud-based data management platform that supports the aggregation, cleansing and standardization of information for global transparency. Data Analytics is a tool that provides detailed reports and insights. 


Together, Data EZ and Data Analytics help you make strategic decisions based on real-time data. Manage payments, grants, contract fees, and more.

Monitoring Compliance

Monitor Mate is a compliance monitoring platform with integrated global risk assessment functionality built right in. When you can monitor risks, you can mitigate them. Monitor Mate can handle everything from a small operation to a huge, global enterprise.

Cresen Solutions also offers life sciences consulting services that help you excel at the complex tasks that come with risk management. We have an expert staff bursting with life sciences talent and a proven track record solving difficult compliance challenges.


Contact Cresen Solutions


Topics: Key Risk Indicators in Compliance Monitoring

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