A company identifies three potential threats with the following annual probabilities and monetary impacts: Threat T1: $p_{1}=0.02$, impact = £50,000; Threat T2: $p_{2}=0.05$, impact = £30,000; Threat T3: $p_{3}=0.10$, impact = £20,000. Three mitigation options are available: (i) M1 reduces the probability of T1 by 60 % at a cost of £5,000 per year; (ii) M2 reduces the impact of T2 by 40 % at a cost of £4,000 per year; (iii) M3 reduces the probabilities of both T2 and T3 by 30 % each at a cost of £6,000 per year. Only one mitigation can be implemented. Calculate the expected annual loss reduction for each option, the reduction‑per‑cost ratio, and indicate which option provides the highest ratio.

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Mitigation M3 gives the greatest risk‑reduction per cost (ratio ≈ 0.175).

Gce Model Questions Vol1 2020 Computer Studies Question 27

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