Takaful Nasional Sdn Berhad

Risk Management Manual

Appendix 3 Qualitative Risk Measures Classifications

Table 3.1: Qualitative Measure of Likelihood

Example of qualitative measure of Likelihood for (A) Enterprise and (B) Business Unit:

(A) Rating Description

5 Almost certain High likelihood of occurrence unless controlled, i.e. almost certain to occur more than once within the next twelve months

4 Likely The risk is almost certain to occur within the next twelve months, unless controlled

3 Possible Some likelihood of risk occurring unless controlled, i.e. the risk could occur at least once in the next 3 years

2 Unlikely The risk could occur at least once in the next 3 to 5 years

1 Rare Very low potential for occurrence, i.e. unlikely to occur in the next 5 to 10 years

(B) Rating Description

5 Almost certain Is expected to occur in most circumstances. High likelihood of occurrence unless controlled, i.e. almost certain to occur more
than once within the next 12 months.

4 Likely Will probably occur in most circumstances. The risk is almost certain to occur at least once within the next 12 months, unless
controlled.

3 Possible Might occur at some time. Some likelihood of risk occurring unless controlled. i.e. the risk could occur at least once in the next
24 months.

2 Unlikely Could occur at some time. The risk could occur at least once in the next 24 to 36 months (i.e. 2 to 3 years).

1 Rare May occur only in exceptional circumstances. Very low potential for occurrence, e.g. unlikely to occur in the next 3 to 5 years.
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Risk Management Manual

Table 3.2: Qualitative Measure of Impact

Example of qualitative measure of Consequence or Potential Impact (Enterprise):

Rating Qualitative Description of Impact Quantitative or Financial Impact

5 Catastrophic Viability of ongoing operations threatened • Direct loss or opportunity cost >
- failure to meet key strategic objective RM20m
- loss of key competitive advantage / opportunity • Solvency threatened
- significant loss of reputation and production capability • Sustained negative investment return
- large number of key employees or directors leave
- material breach of legislation with very significant financial or
reputational consequences

4 Major Significantly reduced ability to achieve business objectives • Direct loss or opportunity cost of
- major impact on business strategy RM10m-RM20m
- loss of market confidence • Negative investment return in a
- short term loss of production capability period
- some key employees leave; high staff turnover; poor reputation as an
employer
- regulatory breach with material consequences but which cannot be readily
rectified

3 Moderate Disruption to normal operations with a limited effect on achievement of • Direct loss or opportunity cost of
business strategy RM5m –RM10m
- temporary loss of production capabilities • Lower investment return than budget
- reputation damaged to some extent
- widespread staff morale problems; key employee leaves
- regulatory breach with material consequences but which can be readily
rectified
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Risk Management Manual

Rating Qualitative Description of Impact Quantitative or Financial Impact

2 Minor Minor impact on achievement of business strategy • Direct loss or opportunity cost of
- minor loss of production capabilities RM2m -RM5m
- limited damage to reputation • Marginal drop in investment return
- minor cost, quality and time impact below budget
- short term staff morale problems
- regulatory breach with minimal consequences but cannot be easily
rectified
1 Insignificant Minimal impact on business strategy • Direct loss or opportunity cost <
- accounting/administrative problems with no material legal, decision- RM2m
making or profit and loss impact
- minimal reputational sensitivity
- routine Human Resource issues
- Rrgulatory breach with minimal consequences and easily rectified
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Risk Management Manual

Table 3.3: Qualitative Measure of Impact

Example of qualitative measure of Consequence or Potential Impact (Business Unit):

Indicative description
Level Organisation- Performance Financial Employees Legal and Projects
wide Regulatory
5 Catastrophic Failure to meet Loss of key Direct loss or Large number of Large scale class Complete failure to
key strategic competitive opportunity cost key employees action; material deliver one or more
objective; advantage / > RM20m or directors breach of key aspects of a
organisational opportunity leave legislation with project (e.g. quality,
viability Solvency very significant timing, cost)
threatened; major Significant loss threatened financial or
financial overrun; of reputation and reputational
major production Sustained consequences
reputational capability negative
damage investment
Major milestone return
missed by > 12
months

4 Major Major impact on Failure to Direct loss or Some key Regulatory breach Material failure of a
strategy; major achieve some opportunity employees with material key project outcome
reputational performance cost of RM10m- leave; high staff consequences but (e.g. quality, timing,
sensitivity targets RM20m turnover; poor which cannot be cost) with significant
reputation as an readily rectified operational
Major milestone Negative employer implications
missed by 6 – 12 investment
months return in a
period
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Risk Management Manual

Indicative description
Level Organisation- Performance Financial Employees Legal and Projects
wide Regulatory
3 Moderate Moderate impact Some reduction Direct loss or Widespread Regulatory breach Key output not
on strategy; in performance opportunity cost staff morale with material delivered as planned
moderate of RM5m- problems; key consequences but but within tolerance
reputational Major milestone RM10m employee leaves which can be limits and operations
sensitivity missed by 3 – 6 readily rectified not materially
months Zero investment affected
return in a
period
2 Minor Minor impact on Minor reduction Direct loss or Some short term Regulatory breach One or more minor
strategy Minor in performance opportunity cost staff morale with minimal deliverables not
reputational of RM2m – problems consequences but delivered but overall
sensitivity Major milestone RM5m which cannot be project outcomes
or deadline readily rectified achieved within
missed by 1 – 3 Lower tolerable limits
months investment
return in a
period
1 Insignificant Minimal impact Negligible Direct loss or Routine HR Regulatory breach Negligible or no
on strategy performance opportunity cost issues with minimal impact on cost,
Minimal reduction < RM2m consequences and timing or quality of
reputational Static readily rectified deliverable
sensitivity Milestone investment
missed by < 1 return in a
month period