CAS-004 Governance, Risk, and Compliance Practice Question
A risk manager is applying the FAIR model to quantify a risk. Which TWO of the following are primary components used in FAIR analysis? (Select TWO.)
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Loss Magnitude (LM)
FAIR model decomposes risk into Loss Event Frequency (LEF) and Loss Magnitude (LM). Single Loss Expectancy (SLE) and Annualized Rate of Occurrence (ARO) are used in quantitative risk analysis (e.g., ALE), but not primary FAIR components. Exposure Factor (EF) is part of SLE calculation. Annual Loss Expectancy (ALE) is a result, not a component.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
Loss Magnitude (LM)
Why this is correct
The probable magnitude of a loss event.
- ✗
Single Loss Expectancy (SLE)
Why it's wrong here
Used in classic quantitative analysis, not a primary FAIR component.
- ✗
Annual Loss Expectancy (ALE)
Why it's wrong here
A derived result, not a primary component.
- ✓
Loss Event Frequency (LEF)
Why this is correct
The probable number of times a loss event occurs in a given timeframe.
- ✗
Annualized Rate of Occurrence (ARO)
Why it's wrong here
Related to LEF but not a primary FAIR component; FAIR uses LEF.
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