Richman is considering buying insurance for each smartphone that employee. Use t
ID: 421570 • Letter: R
Question
Richman is considering buying insurance for each smartphone that employee. Use the ALE to determine the usefulness of this safeguard. For exampkep, Richman could purchase insurance for each device for 25.00 per year. The safeguard value is 25.00 x 1,000 devices, or 25,000. It is estimated that if the insurance is purchased, the ARO will decrease to 5. Should the company purchase the insurance? Determine the effectiveness of the safeguard: Current ALE= ARO with control=5 ALE with control= Savings with control= __________(Current ALE - ALE with control) Safeguard value (cost of control) = 25,000 Realized savings= _________(Savings with control -safeguard value)Should Richman buy the insurance? Explain your answer.
Richman is considering buying insurance for each smartphone that employee. Use the ALE to determine the usefulness of this safeguard. For exampkep, Richman could purchase insurance for each device for 25.00 per year. The safeguard value is 25.00 x 1,000 devices, or 25,000. It is estimated that if the insurance is purchased, the ARO will decrease to 5. Should the company purchase the insurance? Determine the effectiveness of the safeguard: Current ALE= ARO with control=5 ALE with control= Savings with control= __________(Current ALE - ALE with control) Safeguard value (cost of control) = 25,000 Realized savings= _________(Savings with control -safeguard value)
Should Richman buy the insurance? Explain your answer.
Determine the effectiveness of the safeguard: Current ALE= ARO with control=5 ALE with control= Savings with control= __________(Current ALE - ALE with control) Safeguard value (cost of control) = 25,000 Realized savings= _________(Savings with control -safeguard value)
Should Richman buy the insurance? Explain your answer.
Explanation / Answer
From the Richman case: Value of smartphone is $500, 1000 employees have these company owned devices and 75 employees have lost or damaged smartphones.
SLE = $500 (i.e. value of smartphone or total loss expected from incident)
ARO = 75 ( 75 smartphone damaged or number of times the incident can happen in an year)
ALE = SLE*ARO (Expected loss for year)
= 500*75 = $37,500
Current ALE = $37,500
ARO with control = 5
ALE with control = SLE*ARO with control = 500*5 = $2500
Savings with control = $37500 - $2500 = $35000
Safeguard value = $25000
Realized savings = Savings with control - Safeguard value = $35000 - $25000 = $10,000
Yes, Richman should buy the insurance as the devices will be insured as well Richman would still have savings i.e. $10,000.
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