CMA Intermediate · Operations Management and Strategic Management · Digital Strategy
A firm's risk register rates a data breach as having a 5% annual probability and an estimated loss of ₹40 lakh. Cyber insurance costing ₹1.2 lakh a year would cover the entire loss. Considering only the expected annual loss versus the premium, what is the expected annual loss and is the premium lower than it?
Expected annual loss is 5% of ₹40 lakh, which is ₹2 lakh. Since the ₹1.2 lakh premium is lower than this expected loss, buying cyber insurance is cost-justified on this simple measure.
- A₹2 lakh; yes, premium is lowerCorrect
- B₹2 lakh; no, premium is higher
- C₹0.2 lakh; premium is higher
- D₹8 lakh; premium is lower
Explanation
Expected annual loss = 5% × ₹40 lakh = ₹2 lakh. The premium of ₹1.2 lakh is below this, so insurance is cheaper than the expected loss. Option ₹0.2 lakh comes from misplacing the decimal; ₹8 lakh comes from using 20% instead of 5%.
Did you get it right without looking?
One question tells you little. A timed set on Digital Strategy shows your real accuracy, how long you take and where you lose marks.
More Digital Strategy questions
- A Mumbai logistics firm uses software bots to log in to the ERP, copy invoice details from emails into the system and match them with purcha…
- A manufacturer sells smart water purifiers and earns recurring revenue from sensor-driven filter replacements and usage-based service plans,…
- An Indian insurer wants to build a digital strategy that uses cloud computing to replace its own data centres. Which is the most direct stra…
- A Bengaluru bank deploys a generative AI assistant to draft customer replies. Management wants to retain the efficiency gain while controlli…
- A Pune-based company runs an online platform that connects independent tutors with students and earns a commission on every session booked, …
- A digital platform's value to each user rises as more users join, because every new participant can interact with a larger pool. Which conce…