A study of data losses incurred by companies due to hackers penetrating the Internet security of the company found that 60 percent of the companies in the industry studied had experienced security breaches and that the average loss per security breach was $15K.

1. What is the probability that a company will not have a security breach?

1.     Answer:

Subtracting the percentage of organisations that had security breaches from 100% yields the likelihood that a company won’t incur a security violation. As 60% of businesses experienced security vulnerabilities, the likelihood that yours will not be the next is 40% (or 100% minus 60%).

Determining the likelihood that a business won’t experience a security breach using the data supplied:

As stated:

Sixty percent of the businesses surveyed reported security breaches. As a result, 40% of businesses had no security breaches. The likelihood that a business won’t experience a security breach is 40%, or 0.40. Thus, there is a 0.40 or 40% chance that a business won’t experience a security breach. This indicates that a 40% probability exists that a study company chosen at random did not encounter a security breach.

2. One company had two breaches in one year and is therefore contemplating spending money to decrease the likelihood of a violation. Assuming that the next year would similarly be the same as this year regarding security breaches, the firm should consequently consider how much it should be willing to pay to eliminate security breaches. Hence, evaluating the potential costs and benefits of preventative measures becomes crucial for the company’s decision-making process.(i.e., what is the expected value of their loss)?

Answer:

The average loss per breach multiplied by the likelihood of two breaches in a year yields the expected loss. The average loss is $15,000, and there’s a 60% chance that there was a security breach here.  Therefore, a cost of $18,000 is anticipated to be borne by the business after multiplying $15,000 by the probability of two breaches. It is recommended that the organisation set aside up to $18,000 to address two security flaws that are anticipated to arise in the upcoming year.

As mentioned:

Each security breach costs, on average, $15,000.

Two breaches occurred at the firm in a single year.

Estimated damage amount if the company experiences two breaches =Average loss per infraction x Total number of violations

$15,000 × 2 = $30,000 is the expected value.

Since this is the estimated value of their loss if the same number of breaches (two) occurred the next year, the company should be prepared to pay up to $30,000 to remove security breaches. In theory, this expense would lessen the predicted financial damage caused by security breaches.