hardMultiple ChoiceObjective-mapped
Net Benefit Calculation: Risk Management Cost-Benefit Analysis for CISSP
During a risk assessment, a company identifies that its primary data center is located in a flood-prone area. The estimated annual loss expectancy (ALE) for a flood event is $500,000. Installing flood barriers costs $200,000 and reduces the ALE to $50,000. What is the net benefit of implementing the flood barriers?
Quick Answer
The answer is $250,000. This net benefit is derived from the CISSP ALE calculation by first determining the reduction in annual loss expectancy, which is the original ALE of $500,000 minus the new ALE of $50,000, yielding a $450,000 reduction. Subtracting the $200,000 cost of the flood barriers from that reduction gives the net benefit of $250,000, directly applying the risk management cost-benefit analysis formula: Net Benefit = (ALE_old - ALE_new) - Cost_of_control. On the CISSP exam, this tests your ability to distinguish between the reduction in ALE and the net benefit, a common trap where candidates forget to subtract the control cost. Remember the memory tip: “Reduce first, then subtract the cost” to avoid picking the $450,000 reduction as the final answer.
⚠ Common exam trap
The trap here is that candidates often forget to subtract the cost of the control from the reduction in ALE, leading them to select the $450,000 reduction as the net benefit instead of the correct $250,000.
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
✓
$250,000
The net benefit is calculated as the reduction in ALE minus the cost of the control. The original ALE is $500,000, and after implementing flood barriers the ALE drops to $50,000, a reduction of $450,000. Subtracting the $200,000 cost of the barriers yields a net benefit of $250,000. This aligns with the CISSP risk management formula: Net Benefit = (ALE_old - ALE_new) - Cost_of_control.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
$300,000
Why it's wrong here
Incorrect - this is the reduction in ALE but does not subtract the cost.
- ✓
$250,000
Why this is correct
Correct - reduction in ALE ($450,000) minus cost ($200,000) = $250,000.
- ✗
$450,000
Why it's wrong here
Incorrect - this is the ALE reduction before cost.
- ✗
$200,000
Why it's wrong here
Incorrect - this is just the cost of control.
Go deeper
Related to this question
Learn chapter
Asset Security: Privacy and Data Retention
Key term
Risk assessment
Risk assessment is the process of identifying, analyzing, and evaluating potential threats to an organization's assets to determine the likelihood and impact of those threats, and to decide on appropriate treatment measures.
Key term
Risk
Risk is the possibility that an event or action will negatively affect an organization's ability to achieve its goals, often measured in terms of likelihood and impact.
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Same concept, more angles
2 more ways this is tested on CISSP
These questions test the same concept from different angles. Work through them to make sure you can recognise it however the exam phrases it.
Variation 1. A company is conducting a risk assessment and needs to prioritize risks based on both likelihood and impact. The risk management team decides to use a quantitative approach. Which of the following is a key advantage of using quantitative risk analysis over qualitative risk analysis?
medium- ✓ A.It provides monetary values for risks, facilitating cost-benefit analysis.
- B.It relies on expert opinions and does not require historical data.
- C.It is easier to communicate to non-technical stakeholders.
- D.It requires less data and is faster to perform.
Why A: Quantitative risk analysis assigns monetary values to assets, threats, and vulnerabilities, enabling precise cost-benefit calculations for risk mitigation options. This allows organizations to compare the cost of controls directly against the expected loss, a key advantage over qualitative methods that rely on subjective rankings.
Variation 2. A security manager is conducting a risk assessment for a new cloud application. The manager needs to estimate the potential financial loss from a data breach. Which approach should be used?
medium- A.Scenario-based risk analysis with ordinal scales
- B.Qualitative risk analysis using high/medium/low ratings
- C.Benchmarking against industry standards
- ✓ D.Quantitative risk analysis using annualized loss expectancy (ALE)
Why D: Quantitative risk analysis using Annualized Loss Expectancy (ALE) provides a specific monetary estimate of potential financial loss, which is exactly what the security manager needs for a data breach scenario. ALE is calculated as Single Loss Expectancy (SLE) × Annualized Rate of Occurrence (ARO), enabling data-driven budgeting and cost-benefit analysis for cloud application security controls.
JA
Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
This CISSP practice question is part of Courseiva's free ISC2 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 CISSP exam.