Suppose that an attack would do $200,000 in damage and has a 25% annual probabil

Question

Suppose that an attack would do $200,000 in damage and has a 25% annual probability of success. Spending $15,000 per year on Countermeasure A would reduce the damage of a successful attack by 50%. a) Do a risk analysis comparing benefits and costs. Show your work clearly. Explain whether or not the company should spend the money. b) Do another risk analysis if Countermeasure B costs $25,000 per year but would cut the annual probability of a successful attack by 40%. Again, show your work. Explain whether or not the company should spend the money.

Explanation / Answer

Suppose that an attack would do $200,000 in damage and has a 25% annual probability of success.
Spending $15,000 per year on Countermeasure A would reduce the damage of a successful attack by 50%.
a) Do a risk analysis comparing benefits and costs. Show your work clearly.
Explain whether or not the company should spend the money.
Given, attack cost: $200,000 damage.
25% annual probability of success.
So, the damage cost on an annual average will be $50,000.
So, spending $15000 per year would reduce the damage of a successful attack by 50%
So, if we spend $15000, the damage cost on an annual average will be $25,000.
Or, in other words, spending $15000 would save you $25000 per annum.
Therefore, the profit is: $25000 - $15000 = $10000 p.a. and the company spending the amount
will be profitable.

b) Do another risk analysis if Countermeasure B costs $25,000 per year but would cut the
annual probability of a successful attack by 40%. Again, show your work.
Explain whether or not the company should spend the money.
As discussed earlier, the the damage cost on an annual average will be $50,000.
Spending $25000 per year would cut the annual probability of a successful attack by 40%.
So, if $25000 spent per year, the attack probability will be reduced from 25% to 15%.
So, the damage cost on an annual average will be $30,000.
So, spending $25000 per year would reduce the damage cost from $50000 to $30000.
Therefore, the profit is: $20000 - $25000 = $-5000 which means a loss. And is therefore,
no advisable to go with this countermeasure.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.