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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Risk Management

Kaveri Pharma Ltd rates a regulatory-recall risk as having a 'Likely' probability and a 'Severe' impact on a 5x5 matrix, scoring 4 for likelihood and 5 for impact. Using the usual multiplication method, what is the inherent risk score and what does it represent?

The score is 20 and it is the inherent risk. Multiplying likelihood 4 by impact 5 gives 20, and since the rating ignores existing controls, it shows the exposure before mitigation. Residual risk would be assessed afterwards, taking controls into account.

  1. A20, the exposure before considering existing controlsCorrect
  2. B9, the exposure after considering existing controls
  3. C20, the exposure remaining after controls are applied
  4. D9, the exposure before considering existing controls

Explanation

Score = likelihood x impact = 4 x 5 = 20. Because it is rated without crediting controls, it is the inherent risk. Adding gives 9, which is the wrong method, and residual risk is the figure after controls.

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