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Difficulty: Very hardRisk Identification, Assessment, and Response Strategies

A cloud-native enterprise operates a core microservices infrastructure valued at 4,000,0004,000,000. Threat intelligence data indicates that a catastrophic ransomware compromise occurs once every 55 years (ARO=0.20\text{ARO} = 0.20), resulting in a 40%40\% operational loss per incident (EF=0.40\text{EF} = 0.40). The Chief Information Security Officer (CISO) is evaluating an automated endpoint detection and response (EDR) platform costing 60,00060,000 annually. If deployed, the EDR solution will mitigate the incident impact, reducing the Exposure Factor to 5%5\% (EF=0.05\text{EF} = 0.05) while the occurrence rate remains unchanged. Based on quantitative risk assessment principles, what is the net annual financial benefit of implementing the proposed EDR platform?

  1. $220,000Answer
  2. B
    $280,000
  3. C
    $1,340,000
  4. D
    -$20,000

Answer

The net annual financial benefit of implementing the EDR platform is 220,000220,000.
The correct answer demonstrates proper quantitative risk analysis by computing baseline ALE (320,000320,000), residual ALE (40,00040,000), total loss avoided (280,000280,000), and subtracting the control's annual maintenance cost (60,00060,000) to confirm a net benefit of 220,000220,000.

Step-by-Step Solution

1
Calculate the current Single Loss Expectancy (SLE) and Annual Loss Expectancy (ALE) prior to control implementation.
SLEinitial=AV×EFinitial=$4,000,000×0.40=$1,600,000\text{SLE}_{\text{initial}} = \text{AV} \times \text{EF}_{\text{initial}} = \$4,000,000 \times 0.40 = \$1,600,000. ALEinitial=SLEinitial×ARO=$1,600,000×0.20=$320,000\text{ALE}_{\text{initial}} = \text{SLE}_{\text{initial}} \times \text{ARO} = \$1,600,000 \times 0.20 = \$320,000.
Establishing baseline annual risk cost requires determining expected annual loss prior to mitigation.
2
Calculate the modified SLE and ALE following EDR safeguard deployment.
SLEmitigated=$4,000,000×0.05=$200,000\text{SLE}_{\text{mitigated}} = \$4,000,000 \times 0.05 = \$200,000. ALEmitigated=$200,000×0.20=$40,000\text{ALE}_{\text{mitigated}} = \$200,000 \times 0.20 = \$40,000.
Quantifying residual risk requires evaluating modified exposure factors under control protection.
3
Calculate the total annual loss reduction (ALE avoided).
ALEavoided=ALEinitial−ALEmitigated=$320,000−$40,000=$280,000\text{ALE}_{\text{avoided}} = \text{ALE}_{\text{initial}} - \text{ALE}_{\text{mitigated}} = \$320,000 - \$40,000 = \$280,000.
Determining gross risk reduction isolates the financial risk transferred or avoided by the security control.
4
Subtract the annual cost of the safeguard control to determine net annual benefit.
Net Benefit=ALEavoided−Annual Control Cost=$280,000−$60,000=$220,000\text{Net Benefit} = \text{ALE}_{\text{avoided}} - \text{Annual Control Cost} = \$280,000 - \$60,000 = \$220,000.
A safeguard is cost-effective only when loss reduction exceeds annual operational and licensing expenses.

Key Concept

Quantitative Risk Assessment and Safeguard Cost-Benefit Analysis (ALE = AV * EF * ARO)
Estimated Time:2m 30s
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Topics

Risk Identification, Assessment, and Response Strategies

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