Question No.

Refer to the article in Topic 5 / Core Articles, “Colleges Manage and Minimize Security Threats via
Advance Solutions”.
a. Indicate an example of a risk control option being discussed in this article. [2 points]
Risk control can be described as a set of methods to evaluate the potential losses and take actions

to either reduce or eliminate these threats. In this article, a risk of cyber security threat, that is

being faced by many colleges is discussed. The major challenge in cyber security is creating a

holistic strategy for information security program. Another critical risk control factor is the

incident response plan discussed in this article. As all educational institutions are facing the same

level of threat of cybersecurity risk like any other large enterprise. So a computer incident

response team is prepared to prevent the being victim of intellectual property theft and denial of

service attacks. In risk control options, to reduce the potential losses due to cyber security thread,

some measures are taken to eliminate or reduce these threats. These may include the installation

and replacement of fire walls to handle the college serve maintenance. Along with it, the use of

multiple firewalls in network architecture streamline the security posture. To mitigate the issue of

limited resources, a pool of resources is generated through academic alliance of big educational

institutions.

b. For your answer to part [a], indicate what specific risk control option is being illustrated by
the example. In other words, is your answer an example of avoidance, loss prevention, etc.?
[2 points]

In the above given answer, the risk control option is being discussed by the example is loss

Prevention. Loss prevention accepts the risk but attempts to minimize the loss rather than

eliminate it.

c. For your answer to part [b], explain why your answer is an example of risk control. In other
words, explain how it fits into the goals of risk control options if the specific risk control
option is properly implemented. [2 points]
 The main purpose of risk control in general is the activities or attempts to control the risk factors

and make it easier to handle them in case of any risk threat occurrence. It can be done in three

different ways. (a) reduce the frequency of loss (b) reduce the severity of the loss (c) improve the

predictability of the loss. Loss prevention is assuming a lose that has the probability to occur. So

it is needed to strategies that what could have done either before (pre-loss) or after (post-loss) the

loss to mitigate or reduce the severity of the loss. In this article, some pre-loss measures like

installation of firewalls and some post loss measures like the training of staff against these

phishing and building an incident response team fits into the loss prevention goal of risk control

option.

Question No. 2
Refer to the Topic 5 / Supplemental Articles, “Nissan Adds Nearly 346K Vehicles to Taketa Recall
Saga”.
a. Indicate an example of a risk control option being discussed in this article. [2 points]

In this article, the auto care maker company Nissan is recalling its 346,000 vehicles by getting

realize a potential threat of the use of ammonium nitrate in the air Bag inflator that may cause the

death of front passengers.

b. For your answer to part [a], indicate what specific risk control option is being illustrated by
the example. In other words, is your answer an example of avoidance, loss prevention, etc.?
[2 points]

In the above given example, the risk control option that is discussed is avoidance.

c. For your answer to part [b], explain why your answer is an example of risk control. In other
words, explain how it fits into the goals of risk control options if the specific risk control
option is properly implemented. [2 points]

Avoidance is a best risk control option method of loss control. When a manufacturer discovers

any dangerous chemical in their product that may get harm to its users, then manufacturer finds a

safe substitute chemical to protect the health of the users. In this above given article, Nissan

company found that the ammonium nitrate is used in the inflators manufactured by Taketa
 company and Nissan use those inflators in their vehicles. So Nissan recall all the vehicles to

replace those inflators to avoid any more loss of the lives of front passengers. As mentioned in

the article that at least 25 people have been killed and hundreds injured by Taketa inflators.

Question No. 3
Consider the following two scenarios [Option A and Option B]:
Shepherd Inc. has the total inventory of $800. Currently, Shepherd has this entire inventory stored
in one warehouse. There is a 20% chance that a fire could occur. If this fire occurs, then Shepherd
will lose their entire inventory. [Option A]
As an alternative to keeping their entire inventory in one warehouse, Shepherd is considering
separating their inventory evenly into two different warehouses, warehouse X and warehouse Y.
Once again, there is a 20% chance that a fire could occur in each warehouse. If this fire occurs,
then Shepherd would once again lose their entire inventory in that particular warehouse. [Option
B]
Read about this concept in Chapter 5 of your textbook under the heading ‘Separation’ on pages 5.9
– 5.12 in order to answer this question properly.
a. First, consider Option A.
What is the probability of having zero dollars in losses?
What is the probability of having $800 in losses?
Derive the probability distribution for total dollar losses under Option A. Note that this question
asks for total dollar losses, not number of losses. Hint: Think about the definition of a probability
distribution and apply it in this case. [2 points]
The total probability of outcome is 1.0, which shows that having probability of 0-dollar amount of loss +

the probability of $800 amount of loss = 1.0

20% of chance that fire could occur and shepherd will lose their entire inventory. Soo,

The probability of $800-dollar amount of lose= 20% or 0.2

Hence, the probability of 0-dollar amount of loss= 1-0.2= 0.8

Expected loss = 0*0.8+ $800 * 0.2 = $160

Total Losses Probability Mean Loss- Mean (Loss- Mean)2 (Loss-

of possible Mean)2 *
loses Prob.
 $0 0.8 160 -160 25,600 20,480
$ 800 0.2 160 640 409,600 81,920
Variance= 20,480 + 20,480 = 102,400
b. Now consider Option B.
Derive the probability distribution for total dollar losses under Option B. Hint: In the case of
Option B, you need to consider all the possible outcomes in terms of dollar amount of losses,
recognizing that Shepherd now has two warehouses. Further hint: consider the rules of probability
as discussed in class when you derive your probability distribution. [2 points]
There are 4 possible outcome of losses

 Probability of no fire and $0 loss occur in both X and Y ware house: 1-0.2 =0.8

As there are two warehouses so the probability of 0 fire = 0.8*0.8=0.64

 Fire occur in X ware house and no fire in warehouse Y= 0.2*0.8 =0.16

 Fire occur in Y ware house and no fire in warehouse X= 0.8*0.2 =0.16

 Fire occur in both X and Y warehouse = 0.2 *0.2 = 0.04

Expected loss = $0*0.64 + $400*0.16 + $400*0.16 + $800*0.04

= 0+ 64+64+32

= $160

Total Losses Probability Mean Loss- Mean (Loss- Mean)2 (Loss-

of possible Mean)2 *
loses Prob.
$0 0.64 160 -160 25600 16,384
$ 400 0.16 160 240 57600 9,216
$ 400 0.16 160 240 57600 9,216
$ 800 0.04 160 640 409600 16,384

Variance= 16,384+9,216+9,216+16,384 = 51200

c. Compare the amount of risk Shepherd faces under Option A vs. Option B. Which option
has more risk? Justify and demonstrate your answer. Recall our discussion in Topic 4 about
how we measure risk. [4 points]
OPTION X: VARIANCE = 102,400 , SD=√ VAR =320
 CoV= SD/ mean= 320/160= 2
OPTION Y: VARIANCE = 51,200 , SD=√ VAR= 226.27

CoV= SD/ mean=226.27/160= 1.41

Conclusion: As the option X and option Y have the same mean, so we compare their Coefficient of

variance. The result shows that the Option X is more risker than option Y. As the measure of dispersion

for option X is 2 that is higher than option Y.