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Homework Assignment#2 Risk Analysis

Homework Assignment#2 Risk Analysis -...

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Home work Assignment #2: Risk Analysis CIS 635 Sushant Arora CSU ID 2505446 Q1 )  A critical software has been developed. It is estimated that the probability that the software has critical error  is 0.4, and the loss from critical error when actually occurs is $20 million dollars. The management is  contemplating on whether to perform 1) an independent V & V or 2) to do a walkthrough to reduce the risk of  critical errors. The probability of critical error can be reduced to 0.05 if V& V is done, but it will cost 2 million  dollars to perform such a task. The probability of critical error can be reduced to 0.15 if walkthrough is done, but it  will cost 0.2 million dollars. Find the RRL for each risk reduction approach.   Sol: Probability that software has critical error =P(UO)=0.4        Loss from critical error                                   =L(UO)=$20,000000        Risk Exposure i.e. RE(before)  = P(UO)*L(UO)=0.4*20,000000        RE(before) = $ 8000000 i) If an independent V & V is done Probability that critical error is reduced = P(UO)=0.05 Total cost incurred to perform the task  = $ 2000000 Risk Exposure when V& V is applied = RE(after) =0.05*20,000000
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