hardMultiple Choice
CRISC Practice Question: A financial institution is assessing the risk of…
A financial institution is assessing the risk of a new real-time payment system. The risk manager calculates that the annualized loss expectancy (ALE) for a potential fraud scenario is $500,000. The cost to implement a fraud detection solution is $200,000 initially with $50,000 annual maintenance. The solution is expected to reduce the ALE by 80%. What is the net benefit of implementing the solution over three years?
⚠ Common exam trap
The trap here is that candidates often forget to include the annual maintenance costs over the full three-year period or mistakenly apply the 80% reduction to the total cost instead of the ALE, leading to incorrect net benefit calculations.
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
✓
$850,000
The net benefit over three years is calculated as the reduction in ALE minus the total cost of the solution. The original ALE is $500,000 per year, and an 80% reduction saves $400,000 annually. Over three years, total savings are $1,200,000. The total cost includes the initial $200,000 plus three years of maintenance at $50,000 each ($150,000), totaling $350,000. Net benefit = $1,200,000 - $350,000 = $850,000.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
$1,000,000
Why it's wrong here
The three-year benefit is $1,200,000 (80% of $1,500,000), less $350,000 cost, giving $850,000. $1,000,000 ignores the $200,000 initial outlay and $150,000 maintenance. It is tempting as a rounded figure, but it would be correct only if the solution were free to implement and maintain.
- ✗
$950,000
Why it's wrong here
$950,000 subtracts only the $350,000 cost from $1,300,000, miscomputing the benefit. The correct benefit is 80% of three years' ALE ($1,200,000), less $350,000, giving $850,000. $950,000 would be right only if the reduction applied to a different ALE base.
- ✗
$800,000
Why it's wrong here
$800,000 appears to subtract the $200,000 initial cost from $1,000,000, but the three-year benefit is $1,200,000 and total cost $350,000, giving $850,000. It is tempting because it uses the correct 80% reduction, yet omits the annual maintenance entirely.
- ✓
$850,000
Why this is correct
The solution cuts the $500,000 ALE by 80%, saving $400,000 annually, or $1,200,000 across three years. Against that, total cost is $200,000 plus three years of $50,000 maintenance, equalling $350,000. Subtracting gives a net benefit of $850,000, satisfying the three-year horizon constraint.
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JA
Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
This CRISC practice question is part of Courseiva's free ISACA certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the CRISC exam.