AppendixAnswers to Review Questions

Chapter 1 : Managing Risk

  1. C. Guidelines help clarify processes to maintain standards. Guidelines tend to be less formal than policies or standards.
  2. A. It does not matter how frequent a loss is projected (only once every 60 years, in this case). What does matter is that each occurrence will be disastrous: SLE (single loss expectancy) is equal to asset value (AV) times exposure factor (EF). In this case, asset value is $2 million, and the exposure factor is 1.
  3. D. ALE (annual loss expectancy) is equal to the SLE times the annualized rate of occurrence. In this case, the SLE is $2 million, and the ARO is 1/60.
  4. A. ARO (annualized rate of occurrence) is the frequency (in number of years) that an event can be ...

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