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FRM Part II · FRM Exam Part II · Case Study: Cyberthreats and Information Security Risks

A bank estimates that a ransomware outage of its trading platform would cost USD 2.0 million per hour in lost revenue for the first 3 hours, and USD 3.0 million per hour thereafter. Recovery investment A reduces expected outage from 8 hours to 5 hours, and investment B reduces it from 8 hours to 6 hours. Ignoring probability, what is the loss avoided by A compared with B?

Investment A avoids USD 3.0 million more loss than B. A five-hour outage costs 3×2 + 2×3 = 12 million, while a six-hour outage costs 6 + 9 = 15 million. The difference is one additional hour at the higher USD 3 million rate.

  1. AUSD 3.0 millionCorrect
  2. BUSD 2.0 million
  3. CUSD 6.0 million
  4. DUSD 9.0 million

Explanation

Loss at 5 hours = 3×2 + 2×3 = 12m. Loss at 6 hours = 6 + 3×3 = 15m. A avoids 3m more than B. Check: the extra hour between 5 and 6 is at the higher 3m rate. Using 2m ignores the higher rate; 6m or 9m misapply it.

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