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 risk assessment team is calculating the Annual Loss Expectancy (ALE) for a critical server. The Single Loss Expectancy (SLE) is $50,000 and the Annual Rate of Occurrence (ARO) is estimated to be 2. The team is considering implementing a new backup solution costing $40,000 per year. Which TWO of the following statements are true regarding the cost-benefit analysis? (Select TWO.)
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
The backup is cost-effective if the ALE reduction exceeds the annual cost.
Option B is correct because a cost-benefit analysis for a risk mitigation measure like a backup solution requires that the reduction in ALE (the benefit) exceed the annual cost of the control. Here, the current ALE is $100,000 (SLE $50,000 × ARO 2). If the backup reduces the ALE by more than $40,000 per year, it is cost-effective. Option E is correct because the current ALE without backup is indeed $50,000 × 2 = $100,000.
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.
✗
The net benefit of the backup is $60,000 per year.
Why it's wrong here
Net benefit cannot be calculated without knowing the ALE reduction.
✓
The backup is cost-effective if the ALE reduction exceeds the annual cost.
Why this is correct
Cost-effectiveness is determined by comparing risk reduction to cost.
Related concept
Read the scenario before looking for a memorised answer.
✗
The ALE after implementing the backup is $100,000 minus the backup cost.
Why it's wrong here
ALE after control depends on new SLE/ARO, not simply subtracting cost.
✗
The payback period for the backup is one year.
Why it's wrong here
Payback period requires investment cost and annual savings, not given.
✓
The current ALE without backup is $100,000.
Why this is correct
ALE = SLE * ARO = $50,000 * 2 = $100,000.
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 mistakenly assume the backup cost is subtracted directly from the current ALE to get a net benefit, ignoring that the control reduces but does not eliminate the risk, and that the payback period requires knowing the actual annual benefit.
Detailed technical explanation
How to think about this question
The ALE formula (SLE × ARO) is foundational in quantitative risk analysis. In practice, a backup solution reduces the SLE (by enabling faster recovery) and may also reduce the ARO (by preventing data loss). The cost-benefit analysis compares the annualized savings (ΔALE) to the annual cost of the control (e.g., $40,000). A common real-world scenario is that backups do not eliminate all risks (e.g., ransomware may still cause downtime), so the post-control ALE must be recalculated using new SLE and ARO estimates.
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 — 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: The backup is cost-effective if the ALE reduction exceeds the annual cost. — Option B is correct because a cost-benefit analysis for a risk mitigation measure like a backup solution requires that the reduction in ALE (the benefit) exceed the annual cost of the control. Here, the current ALE is $100,000 (SLE $50,000 × ARO 2). If the backup reduces the ALE by more than $40,000 per year, it is cost-effective. Option E is correct because the current ALE without backup is indeed $50,000 × 2 = $100,000.
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.
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Question Discussion
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