Which term is a financial measure that compares annual loss to savings from controls?

• A. Return on Investment (ROI)
• B. Payback
• C. Net Present Value (NPV)
• D. Magnitude of Impact

Answer: (A)

Evaluating the financial value of security controls by comparing the savings from reduced risk to the cost of the controls. The term that best fits this approach is return on investment, which shows how much value you get back for each dollar spent. In practice, you quantify the benefit as the annual savings from avoided losses and compare that to the cost of implementing and operating the controls. If the controls significantly cut expected losses, the ROI will be high, signaling a favorable economic return. For example, if a control costs 20,000 per year and reduces annual losses from 100,000 to 30,000, you’re saving 70,000 annually. Subtract the cost to get a net gain of 50,000, and ROI is 50,000 divided by 20,000, or 2.5 (250%). The other metrics don’t capture this direct efficiency ratio: payback looks at the time to recover costs, NPV accounts for the time value of money, and Magnitude of Impact isn’t a standard financial measure.