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Difficulty: Very hardRisk Identification, Assessment, and Response Strategies

A healthcare organization is conducting a quantitative risk assessment for its primary electronic health record (EHR) database cluster, valued at 6,000,0006,000,000. Threat intelligence data indicates that a major ransomware breach has an Annual Rate of Occurrence (ARO) of 0.200.20 with an Exposure Factor (EF) of 0.350.35. To mitigate this risk, the organization evaluates an automated air-gapped immutable backup vault with an annual operating cost of 110,000110,000. This safeguard will reduce the system's Exposure Factor to 0.050.05 while keeping the ARO unchanged. Based on a quantitative risk analysis, what is the net annual financial benefit of implementing this safeguard?

  1. 250,000250,000Answer
  2. B
    360,000360,000
  3. C
    310,000310,000
  4. D
    1,800,0001,800,000

Answer

The net annual financial benefit of implementing the safeguard is 250,000250,000.
The correct answer is 250,000250,000. Calculating quantitative risk requires establishing Baseline ALE (6,000,000×0.35×0.20=6,000,000 \times 0.35 \times 0.20 = 420,000 )andPost−MitigationALE() and Post-Mitigation ALE ( 6,000,000 \times 0.05 \times 0.20 = 60,00060,000). The difference between baseline and post-mitigation ALE is 360,000360,000 in gross savings. Subtracting the annual safeguard cost of 110,000110,000 yields a net annual financial benefit of 250,000250,000.

Step-by-Step Solution

1
Calculate the baseline Single Loss Expectancy (SLE) and Annual Loss Expectancy (ALE) prior to safeguard implementation.
Baseline SLE=$6,000,000×0.35=$2,100,000\text{SLE} = \$6,000,000 \times 0.35 = \$2,100,000. Baseline ALE=$2,100,000×0.20=$420,000\text{ALE} = \$2,100,000 \times 0.20 = \$420,000.
Establishing the initial unmitigated risk exposure establishes the benchmark loss expected per year.
2
Calculate the post-mitigation Single Loss Expectancy (SLE) and Annual Loss Expectancy (ALE).
Post-mitigation SLE=$6,000,000×0.05=$300,000\text{SLE} = \$6,000,000 \times 0.05 = \$300,000. Post-mitigation ALE=$300,000×0.20=$60,000\text{ALE} = \$300,000 \times 0.20 = \$60,000.
Determining the residual loss expected after deploying the safeguard.
3
Calculate the annual gross risk reduction (gross ALE savings).
Gross ALE Savings =Baseline ALE−Post-mitigation ALE=$420,000−$60,000=$360,000= \text{Baseline ALE} - \text{Post-mitigation ALE} = \$420,000 - \$60,000 = \$360,000.
Isolating the gross financial risk avoided due to control implementation.
4
Subtract the annualized cost of the safeguard from the gross ALE savings to determine net benefit.
Net Benefit =$360,000−$110,000=$250,000= \$360,000 - \$110,000 = \$250,000.
Evaluating safeguard cost-justification by comparing gross loss avoidance against recurring operational cost.

Key Concept

Quantitative Risk Assessment and Safeguard Cost-Benefit Analysis (ALE = SLE * ARO = AV * EF * ARO)
Estimated Time:3m 0s
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Topics

Risk Identification, Assessment, and Response Strategies

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