Question 1hardmultiple choice
Full question →- A
5.0
Why wrong: This would require ALE= $12,500,000.
- B
2.0
Why wrong: This would require ALE= $5,000,000.
- C
0.5
Why wrong: This would require SLE= $1,000,000.
- D
0.2
ARO = ALE / SLE = 0.2.
Question 88 of 500
Quick Answer
The answer is 0.2. This is correct because the annual loss expectancy (ALE) calculation follows the formula ALE = SLE × ARO, so solving for the annualized rate of occurrence requires dividing the ALE by the single loss expectancy: $500,000 divided by $2,500,000 equals 0.2. This result means the core banking system is expected to suffer a loss event once every five years on average, a key insight in quantitative risk analysis. On the Certified in Risk and Information Systems Control CRISC exam, this question tests your ability to manipulate the core risk quantification formula, often appearing in scenario-based items where you must derive one variable from the other two. A common trap is confusing ARO with a percentage or forgetting that ARO can be a decimal less than one, representing fractional years between events. For a quick memory tip, remember the formula as “ALE is SLE times ARO” and think of ARO as the “frequency factor” — if the ALE is smaller than the SLE, the ARO must be less than 1, indicating an event that occurs less than once per year.
CRISC IT Risk Assessment Practice Question
This CRISC practice question tests your understanding of it risk assessment. 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.
A financial institution uses a quantitative risk assessment for a core banking system. The annual loss expectancy (ALE) is calculated as $500,000 with a single loss expectancy (SLE) of $2,500,000. What is the annualized rate of occurrence (ARO)?
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
✓
0.2
The annualized rate of occurrence (ARO) is derived from the formula ALE = SLE × ARO. Given ALE = $500,000 and SLE = $2,500,000, solving for ARO yields $500,000 / $2,500,000 = 0.2. This means the core banking system is expected to experience a loss event once every five years on average.
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.
- ✗
5.0
Why it's wrong here
This would require ALE= $12,500,000.
- ✗
2.0
Why it's wrong here
This would require ALE= $5,000,000.
- ✗
0.5
Why it's wrong here
This would require SLE= $1,000,000.
- ✓
0.2
Why this is correct
ARO = ALE / SLE = 0.2.
Related concept
Read the scenario before looking for a memorised answer.
Common exam traps
Common exam trap: answer the scenario, not the keyword
The trap here is that candidates often mistakenly invert the formula, dividing SLE by ALE to get 5.0, or confuse ARO with a percentage, leading to 0.5, instead of correctly applying ALE = SLE × ARO to solve for ARO.
Detailed technical explanation
How to think about this question
In quantitative risk assessment, ARO represents the expected frequency of a threat occurring per year, derived from historical data or statistical models. For a core banking system, a low ARO like 0.2 indicates a rare but high-impact event, often used to justify investment in preventive controls such as redundant failover systems or advanced intrusion detection. The formula ALE = SLE × ARO is foundational in ISO 31000 and NIST SP 800-30 risk management frameworks.
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 CRISC 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.
- →
IT Risk Assessment — study guide chapter
Learn the concepts, then practise the questions
- →
IT Risk Assessment practice questions
Targeted practice on this topic area only
- →
All CRISC questions
500 questions across all exam domains
- →
Certified in Risk and Information Systems Control CRISC study guide
Full concept coverage aligned to exam objectives
- →
CRISC practice test guide
How to use practice tests most effectively before exam day
Related practice questions
Related CRISC practice-question pages
Use these pages to review the topic behind this question. This is how one missed question becomes focused revision.
IT Risk Identification practice questions
Practise CRISC questions linked to IT Risk Identification.
Risk Response and Mitigation practice questions
Practise CRISC questions linked to Risk Response and Mitigation.
Risk and Control Monitoring and Reporting practice questions
Practise CRISC questions linked to Risk and Control Monitoring and Reporting.
IT Risk Assessment practice questions
Practise CRISC questions linked to IT Risk Assessment.
CRISC fundamentals practice questions
Practise CRISC questions linked to CRISC fundamentals.
CRISC scenario practice questions
Practise CRISC questions linked to CRISC scenario.
CRISC troubleshooting practice questions
Practise CRISC questions linked to CRISC troubleshooting.
Practice this exam
Start a free CRISC practice session
Short sessions build daily habit. Longer sessions build exam-day stamina. Try a timed session to simulate real conditions.
FAQ
Questions learners often ask
What does this CRISC question test?
IT Risk Assessment — This question tests IT Risk Assessment — Read the scenario before looking for a memorised answer..
What is the correct answer to this question?
The correct answer is: 0.2 — The annualized rate of occurrence (ARO) is derived from the formula ALE = SLE × ARO. Given ALE = $500,000 and SLE = $2,500,000, solving for ARO yields $500,000 / $2,500,000 = 0.2. This means the core banking system is expected to experience a loss event once every five years on average.
What should I do if I get this CRISC 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.
About these practice questions
Courseiva creates original exam-style practice questions with explanations and wrong-answer analysis. It does not publish real exam questions, exam dumps, or protected exam content. Learn why practice questions differ from exam dumps →
Last reviewed: Jun 25, 2026
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.
Question Discussion
Share a tip, memory trick, or ask about the reasoning behind this question. Do not post real exam questions, leaked content, braindumps, or copyrighted exam material. Comments are moderated and may be removed without notice.
Sign in to join the discussion.