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The Chief Financial Officer (CFO) made some complaints to the CEO regarding recent capital expenditures for security software. Explain the cost benefit analysis method you use to do a quantitative assessment before investing in a security control. Complete and include the table below in your paper.
| Historical PCS incidents | Cost per Incident | Frequency of Occurrence | SLE | ARO | ALE |
|---|---|---|---|---|---|
| Theft of information (hacker) | $25,000 | every 5 years | 25,500 | .2 | |
| Theft of information (employee) | $50,000 | every 2 years | 50,000 | .5 | |
| Web defacement | $6,000 | 12.0 per month | |||
| Theft of equipment | $5,000 | 1.0 per year | |||
| Virus, worms, Trojan horses | $78,000 | ||||
| Denial-of-service attacks | $10,000 |
You are currently deciding whether to invest in data loss prevention software. You have some reliable statistics that the software will reduce your information theft incidents by half of the current values. The cost of the software is $100K per year. Recalculate the new ARO and ALE for hacker and employee information theft. Based on these new values, explain your decision whether or not to invest in the Data Loss Prevention Software.
The requirements for your assignment are: 2-3 page APA paper excluding title and reference pages, provide at least two references and in-text citations in APA format.
Paper For Above Instructions
In today’s digital age, ensuring the security of sensitive information is paramount for organizations. The Chief Financial Officer (CFO) has raised concerns regarding the recent capital expenditures for security software, particularly in relation to data loss prevention (DLP). To address these concerns, this paper will outline the cost-benefit analysis method employed to assess the value of investing in security controls, supported by quantitative assessments.
A cost-benefit analysis (CBA) is a systematic approach utilized to evaluate the economic feasibility of a project or investment by comparing the expected costs against the anticipated benefits (Lee, 2015). In this context, the purpose of the CBA is to determine the financial impact of investing in DLP software, which aims to safeguard sensitive information from theft or loss.
The first step in conducting a CBA involves identifying the costs associated with the existing security measures and the potential costs of implementing the new DLP software. The historical incident data provides a foundation for this analysis. The table presented above outlines historical incidents of personal and organizational security breaches, the associated costs per incident, and their frequency:
| Historical PCS incidents | Cost per Incident | Frequency of Occurrence | SLE | ARO | ALE |
|---|---|---|---|---|---|
| Theft of information (hacker) | $25,000 | every 5 years | 25,500 | .2 | $5,100 |
| Theft of information (employee) | $50,000 | every 2 years | 50,000 | .5 | $12,500 |
| Web defacement | $6,000 | 12.0 per month | 72,000 | 1 | $72,000 |
| Theft of equipment | $5,000 | 1.0 per year | 5,000 | 1 | $5,000 |
| Virus, worms, Trojan horses | $78,000 | 1.0 per year | 78,000 | 1 | $78,000 |
| Denial-of-service attacks | $10,000 | 1.0 per year | 10,000 | 1 | $10,000 |
For the purpose of this analysis, we’ll focus on the two most pertinent incidents, namely the theft of information (hacker) and the theft of information (employee), recalculating the values with the new software in place. The DLP software is projected to reduce incidents of information theft by 50%. Consequently, we will calculate the new Annualized Loss Expectancy (ALE).
1. Theft of information (hacker):
- Original ALE: $5,100
- New ARO: .1 (halved from .2)
- New ALE: $2,500 (calculated as $25,000 * 0.1)
2. Theft of information (employee):
- Original ALE: $12,500
- New ARO: .25 (halved from .5)
- New ALE: $12,500 (calculated as $50,000 * 0.25)
After implementing the DLP software, the total projected ALE for both types of theft is now $15,000.
The cost of the software is $100,000 per year. Therefore, the total financial outlay for maintaining the DLP system is outweighed by the potential savings derived from the reduction in data theft incidents. In our scenario, by investing in DLP software, the company decreases its risk exposure significantly. Considering the projected reduction in theft and the software's ability to mitigate future financial losses, we can conclude that investing in DLP software is financially advantageous.
In conclusion, a detailed CBA reveals the utility of the proposed DLP software when weighed against the costs and potential losses associated with data breaches. The decisive factors for investment lie in the software's ability to effectively minimize incidents of information theft, not only protecting the organization’s financial health but also preserving its reputation in an increasingly competitive environment.
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