Reference no: EM132873928

Question - Management at Bobcat Bank is analyzing controls that can be implemented to reduce the impact of a significant security breach through the company's web server which would result in an estimated loss of $1,200,000 to Bobcat Bank. Research suggests that the probability of a significant web server security breach at Bobcat Bank is 48% so management is considering two options to reduce the probability and/or estimated losses of a web server security breach. Option 1: Hire a firm that specializes in hardening web servers. Option 2: Outsource all web server hosting services to an outside web hosting services firm. The present value cost of option 1 is $12,000 and will reduce the probability of a significant web server security breach to 10%. The present value cost of option 2 is $22,000 and will reduce the probability of a significant web server security breach to 12% and as part of the contract the first 250,000 in losses is covered by the outsourcer. Which option is the most cost-beneficial?