The correct answer is to accept the risk because the control is not cost-justified. This conclusion follows from a cost-benefit analysis of controls using ALE, where the annualized loss expectancy is calculated as SLE multiplied by ARO, yielding $50,000 × 0.2 = $10,000. After applying the $12,000 control, the residual ALE drops to $50,000 × 0.05 = $2,500, but the annual control cost of $12,000 exceeds the reduction in ALE of $7,500, meaning the control fails to provide a positive return. On the CISM exam, this scenario tests your ability to perform quantitative risk analysis and justify risk response decisions based on financial metrics, often appearing as a calculation-based multiple-choice question where a common trap is forgetting to compare the control cost against the ALE reduction rather than the full pre-control ALE. Remember the mnemonic: “If the control costs more than the risk it removes, accepting the risk is the better move.”
CISM Information Security Risk Management Practice Question
This CISM practice question tests your understanding of information security risk management. Read the scenario carefully and evaluate each option against the stated constraints before committing to an answer. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
In a risk assessment, a CISM calculates the annualized loss expectancy (ALE) for a specific threat. The single loss expectancy (SLE) is $50,000 and the annualized rate of occurrence (ARO) is 0.2. What is the ALE, and which risk response is most cost-effective if a control costs $12,000 per year and reduces ARO to 0.05?
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Accept the risk because the control is not cost-justified.
The ALE is calculated as SLE × ARO = $50,000 × 0.2 = $10,000. After implementing the control costing $12,000 per year, the residual ALE is $50,000 × 0.05 = $2,500. The annual cost of the control ($12,000) exceeds the reduction in ALE ($10,000 - $2,500 = $7,500), so the control is not cost-justified. Therefore, accepting the risk is the most cost-effective response.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
✓
Accept the risk because the control is not cost-justified.
Why this is correct
The cost of control is greater than the risk reduction benefit, so acceptance is appropriate.
Related concept
Read the scenario before looking for a memorised answer.
✗
Accept the risk because ALE after control is only $2,500.
Why it's wrong here
The current ALE is $10,000, not $2,500; acceptance is based on cost-benefit analysis.
✗
Implement the control because it reduces ALE to $2,500.
Why it's wrong here
The control cost ($12,000) exceeds the reduction in ALE ($7,500), so it is not cost-effective.
✗
Implement the control because ALE is $10,000, and control cost is only $12,000.
Why it's wrong here
The control cost should be compared to risk reduction ($7,500), not full ALE.
Common exam traps
Common exam trap: answer the scenario, not the keyword
The trap here is that candidates often compare the control cost to the original ALE ($10,000) or to the residual ALE ($2,500) instead of comparing it to the reduction in ALE ($7,500), leading to incorrect cost-justification conclusions.
Detailed technical explanation
How to think about this question
In quantitative risk analysis, the cost-benefit analysis for a control compares the annualized cost of the control to the reduction in ALE (ΔALE = ALE_before - ALE_after). Here, ΔALE = $10,000 - $2,500 = $7,500, which is less than the $12,000 control cost, yielding a negative net benefit. A common real-world scenario is when organizations mistakenly compare control cost to original ALE rather than the risk reduction, leading to overspending on controls that do not provide proportional value.
KKey Concepts to Remember
Read the scenario before looking for a memorised answer.
Find the constraint that changes the correct option.
Eliminate answers that are true in general but not in this case.
TExam Day Tips
→Watch for words such as best, first, most likely and least administrative effort.
→Review why wrong options are wrong, not only why the correct option is correct.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
How this comes up in practice
A practitioner preparing for the CISM exam encounters this exact type of scenario on the job. The correct answer here is not the most general option — it is the best answer for the specific constraint described. Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option. Real exam questions reward reading the full scenario before eliminating options, because the constraint defines which answer fits.
What to study next
Got this wrong? Here's your next step.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Information Security Risk Management — This question tests Information Security Risk Management — Read the scenario before looking for a memorised answer..
What is the correct answer to this question?
The correct answer is: Accept the risk because the control is not cost-justified. — The ALE is calculated as SLE × ARO = $50,000 × 0.2 = $10,000. After implementing the control costing $12,000 per year, the residual ALE is $50,000 × 0.05 = $2,500. The annual cost of the control ($12,000) exceeds the reduction in ALE ($10,000 - $2,500 = $7,500), so the control is not cost-justified. Therefore, accepting the risk is the most cost-effective response.
What should I do if I get this CISM question wrong?
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
What is the key concept behind this question?
Read the scenario before looking for a memorised answer.
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Question Discussion
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