Question
The Espy Company recently had an outside consulting firm perform an audit of its information systems department. One of the consultants identified some business risks
The Espy Company recently had an outside consulting firm perform an audit of its information systems department. One of the consultants identified some business risks and their probability of occurrence. Estimates of the potential losses and estimated control costs are given in Figure.
a. Using the Figure information, develop a risk assessment for the Espy Company.
b. If you were the manager responsible for the Espy Companys information processing system, which controls would you implement and why?
Hazard | Probability that | Expected Losses | Estimated | |
| loss will occur
| Low | High | Control Costs |
Equipment failure | .08 | $50,000 | $150,000 | $ 2,000 |
Software failure | .10 | 4,000 | 18,000 | 1,400 |
Vandalism | .65 | 1,000 | 15,000 | 8,000 |
Embezzlement | .05 | 3,000 | 9,000 | 1,000 |
Brownout | .40 | 850 | 2,000 | 250 |
Power surge | .40 | 850 | 2,000 | 300 |
Flood | .15 | 250,000 | 500,000 | 2,500 |
Fire | .10 | 150,000 | 300,000 | 4,000 |
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