Which of the following is the process of numerically analyzing the effects of identified risks on the overall enterprise's objectives?
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A. B. C. D.B.
A quantitative risk assessment quantifies risk in terms of numbers such as dollar values.
This involves gathering data and then entering it into standard formulas.
The results can help in identifying the priority of risks.
These results are also used to determine the effectiveness of controls.
Some of the terms associated with quantitative risk assessments are: -> Single loss expectancy (SLE)-It refers to the total loss expected from a single incident.
This incident can occur when vulnerability is being exploited by threat.
The loss is expressed as a dollar value such as $1,000
It includes the value of data, software, and hardware.
SLE = Asset value * Exposure factor -> Annual rate of occurrence (ARO)-It refers to the number of times expected for an incident to occur in a year.
If an incident occurred twice a month in the past year, the ARO is 24
Assuming nothing changes, it is likely that it will occur 24 times next year.
-> Annual loss expectancy (ALE)-It is the expected loss for a year.
ALE is calculated by multiplying SLE with ARO.
Because SLE is a given in a dollar value, ALE is also given in a dollar value.
For example, if the SLE is $1,000 and the ARO is 24, the ALE is $24,000
ALE = SLE * ARO -> Safeguard value-This is the cost of a control.
Controls are used to mitigate risk.
For example, antivirus software of an average cost of $50 for each computer.
If there are 50 computers, the safeguard value is $2,500
Incorrect Answers: A: The first thing we must do in risk management is to identify the areas of the project where the risks can occur.
This is termed as risk identification.
Listing all the possible risks is proved to be very productive for the enterprise as we can cure them before it can occur.
In risk identification both threats and opportunities are considered, as both carry some level of risk with them.
C: Unlike the quantitative risk assessment, qualitative risk assessment does not assign dollar values.
Rather, it determines risk's level based on the probability and impact of a risk.
These values are determined by gathering the opinions of experts.
-> Probability- establishing the likelihood of occurrence and reoccurrence of specific risks, independently, and combined.
The risk occurs when a threat exploits vulnerability.
Scaling is done to define the probability that a risk will occur.
The scale can be based on word values such as Low, Medium, or High.
Percentage can also be assigned to these words, like 10% to low and 90% to high.
-> Impact- Impact is used to identify the magnitude of identified risks.
The risk leads to some type of loss.
However, instead of quantifying the loss as a dollar value, an impact assessment could use words such as Low, Medium, or High.
Impact is expressed as a relative value.
For example, low could be 10, medium could be 50, and high could be 100
Risk level = Probability*Impact - D: This is the process of implementing risk response plans, tracking identified risks, monitoring residual risks, identifying new risks, and evaluating risk process effectiveness through the project.
The process of numerically analyzing the effects of identified risks on the overall enterprise's objectives is known as Quantitative Risk Assessment (QRA).
QRA involves assigning numerical values to different aspects of risks, such as likelihood, impact, and frequency. This process allows organizations to prioritize their risks based on the potential impact on their objectives.
In QRA, risks are typically analyzed using statistical models, simulations, and other quantitative methods to estimate the potential impact of each risk. The results of the analysis are then used to develop risk mitigation strategies and make decisions about risk management.
Quantitative Risk Assessment is a more detailed and data-driven approach than Qualitative Risk Assessment (QRA). QRA typically involves more subjective assessments of risk likelihood and impact, based on expert judgment and experience.
Identifying Risks is the initial step in any risk management process, which involves identifying potential risks and documenting them for further analysis. Monitoring and Controlling Risks involves tracking identified risks over time, evaluating their effectiveness, and making necessary adjustments to the risk management strategies.
Therefore, the correct answer to the question is B. Quantitative Risk Assessment.