New Status Conditional/Calculated Column/ Measure or how would you do it?

In Power Query you can unpivot the Policy table and replace N/Y with Not OK and OK:

let
    Source = Excel.CurrentWorkbook(){[Name="Policy"]}[Content],
    #"Unpivoted Other Columns" = Table.UnpivotOtherColumns(Source, {"ACTION"}, "Calification", "Status"),
    #"Y/N to OK/Not OK" = Table.TransformColumns(#"Unpivoted Other Columns",{{"Status", each if _ = "N" then "Not OK" else "OK"}})
in
    #"Y/N to OK/Not OK"

Now you can merge Table 2 with both Table1 and the Policy table:

let
    Source = Excel.CurrentWorkbook(){[Name="Table2"]}[Content],
    #"Changed Type" = Table.TransformColumnTypes(Source,{{"Employee ID", Int64.Type}, {"Type of movement", type text}}),
    #"Merged Queries" = Table.NestedJoin(#"Changed Type",{"Employee ID"},Table1,{"Employee ID"},"NewColumn",JoinKind.LeftOuter),
    #"Expanded NewColumn" = Table.ExpandTableColumn(#"Merged Queries", "NewColumn", {"Last Calification"}, {"Last Calification"}),
    #"Merged Queries1" = Table.NestedJoin(#"Expanded NewColumn",{"Type of movement", "Last Calification"},Policy,{"ACTION", "Calification"},"NewColumn",JoinKind.LeftOuter),
    #"Expanded NewColumn1" = Table.ExpandTableColumn(#"Merged Queries1", "NewColumn", {"Status"}, {"Status"}),
    #"Removed Columns" = Table.RemoveColumns(#"Expanded NewColumn1",{"Last Calification"})
in
    #"Removed Columns"