The protocol contains $1m of PWRD and $4m of Vault. The Utilisation Ratio would be 25% and the TVL of the protocol is $5m. The exposure to underlying protocols is as follows:
In this scenario if there was a total failure from e.g. Harvest the protocol would lose 10% of it's value: i.e. $0.5m.
The loss would be absorbed entirely by Vault users, resulting in $1m of PWRD remaining, and now $3.5m of Vault.