GuardianERM.Net Help [Consequence of Risk]

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Consequence of Risk

The consequence (impact) of a risk to an organisation is the potential loss the organisation can suffer if things go wrong. It is related to a physical item or logical function which is called an organisation unit in GuardianERM.Net. It is NOT related to what may cause the loss. For example, a factory building may have a replacement value of $10m. The consequence of losing the building is therefore $10m and is regardless of whether the loss is caused by fire, earth quake or flooding.

When valuing the consequence, use the maximum probable loss. The risk exposure will be adjusted by the probability of the loss.

Exposure to risk ($) = Probability (or Likelihood) X Consequence ($)

Select the appropriate consequence from the list. The interpretation of the consequence level is specific to an organisation, some suggestions are as follow:

Consequence	Level	Description
Insignificant	1	Low financial loss < 2% of net profit and no injury to property or people. No regulatory breach.
Minor	2	Medium financial loss 2-5% pf net profit. Minor regulatory breach. Minor degradation of operations & service levels. impact is limited to a single area of business. Local intervention with local resources. First aid treatment, on-site damage immediately contained.
Moderate	3	High financial loss 5-7.5% of net profit. Substantial regulatory breach. Substantial degradation of operations & service levels. Impacts multiple areas of business. Substantial management intervention with some external assistance. Medical treatment required, on-site damage contained with outside assistance.
Major	4	Major financial loss 7.5-10% of net profit. Significant regulatory breach. Significant degradation of operations & service levels. Impacts multiple and diverse areas of business. Threatens business viability. Significant senior management intervention with external resources. Extensive injuries, loss of production capability, offsite damage of a minor nature,
Catastrophic	5	Significant/Material financial loss > 10% of net profit. Extensive regulatory breaches. Widespread and total degradation of operations & service levels. Impact across critical functions. Threat to immediate viability of business. Senior management and board intervention using external resources. Deaths, offsite damage of a serious nature.