Question

Difficulty: MediumRisk Identification, Assessment, and Response Strategies

An e-commerce enterprise is performing a quantitative risk assessment for its core order processing cluster, which has an estimated Asset Value (AVAV) of $750,000\$750,000. Security metrics indicate that a ransomware incident affecting this cluster has an Annualized Rate of Occurrence (AROARO) of 0.200.20 and an Exposure Factor (EFEF) of 40%40\%. To mitigate this risk, the enterprise plans to deploy an Endpoint Detection and Response (EDR) control costing $18,000\$18,000 annually. This safeguard will reduce the EFEF to 10%10\% without affecting the AROARO. What is the net annual financial benefit, in dollars, of implementing this security safeguard?

Answer: 27000 USD

Answer

The net annual financial benefit of implementing the EDR safeguard is $27,000.
To determine the net annual benefit, first calculate the initial Annualized Loss Expectancy (ALE1=$750,000×0.40×0.20=$60,000ALE_1 = \$750,000 \times 0.40 \times 0.20 = \$60,000). Next, calculate the post-mitigation Annualized Loss Expectancy (ALE2=$750,000×0.10×0.20=$15,000ALE_2 = \$750,000 \times 0.10 \times 0.20 = \$15,000). The gross annual loss reduction is $60,000$15,000=$45,000\$60,000 - \$15,000 = \$45,000. Finally, subtracting the annual safeguard cost of $18,000\$18,000 yields a net annual benefit of $27,000\$27,000.

Step-by-Step Solution

1
Calculate the initial Single Loss Expectancy (SLE1SLE_1) and initial Annualized Loss Expectancy (ALE1ALE_1).
SLE1=$750,000×0.40=$300,000SLE_1 = \$750,000 \times 0.40 = \$300,000; ALE1=$300,000×0.20=$60,000ALE_1 = \$300,000 \times 0.20 = \$60,000.
Establish baseline quantitative risk exposure before implementing controls.
2
Calculate the post-mitigation Single Loss Expectancy (SLE2SLE_2) and post-mitigation Annualized Loss Expectancy (ALE2ALE_2).
SLE2=$750,000×0.10=$75,000SLE_2 = \$750,000 \times 0.10 = \$75,000; ALE2=$75,000×0.20=$15,000ALE_2 = \$75,000 \times 0.20 = \$15,000.
Determine the residual financial risk remaining after control deployment.
3
Calculate the gross annual risk reduction (ΔALE\Delta ALE).
ΔALE=ALE1ALE2=$60,000$15,000=$45,000\Delta ALE = ALE_1 - ALE_2 = \$60,000 - \$15,000 = \$45,000.
Find the total annualized loss prevented by the control.
4
Calculate the net annual financial benefit.
Net Benefit=ΔALESafeguard Cost=$45,000$18,000=$27,000\text{Net Benefit} = \Delta ALE - \text{Safeguard Cost} = \$45,000 - \$18,000 = \$27,000.
Account for control implementation overhead to determine overall monetary savings.

Key Concept

Quantitative Risk Analysis (ALE, SLE, ARO, and Net Safeguard Cost-Benefit Analysis)
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