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ACCA Strategic Professional · Strategic Business Leader · Identification, assessment and measurement of risk

Harlow Logistics assesses cyber-attack likelihood using only management's own judgement on a scale of 1 to 5, and has no historical data. Which feature best describes this assessment and its main weakness?

This is a qualitative assessment, using subjective scoring of likelihood on a 1 to 5 scale. It is quick and practical where data is scarce, but its weakness is subjectivity, as different assessors may rate the same risk differently, reducing consistency and comparability.

  1. AIt is a qualitative assessment, which is quick but subjective and may vary between assessorsCorrect
  2. BIt is a quantitative assessment, which is precise and free of bias
  3. CIt is a sensitivity analysis, which isolates the effect of one variable
  4. DIt is a Monte Carlo simulation, which relies on probability distributions

Explanation

Scoring risks on a subjective 1-5 scale is a qualitative method. It is simple and useful where data is lacking, but results depend on the judgement of assessors and can be inconsistent.

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