Cost Benefits Analysis

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Introduction Cost-Benefit Analysis is a process followed to analyze business decisions. The benefits of a given business-related decision are summed and then the costs of taking that action are subtracted. In other words, before approving a new plan or taking on a new project, the organization’s managers will conduct a cost-benefit analysis to evaluate all of the potential costs and revenues that may be generated if the project is completed. The results of the analysis will determine whether the project is feasible, or if another project should be pursued. ("Cost-Benefit Analysis.") Background The idea of this economic accounting originated with the French engineer, Jules Dupuit. Later on, the British economist, Alfred Marshall, came up with some of the formal concepts that made the foundations of CBA. However, the practical development of CBA was a result of the Federal Navigation Act of 1936. (Watkins) Definition The cost-benefit analysis was developed to build a business case for the use of technology solutions by comparing the net benefit, investment amount, cost effectiveness and return on investment. The analysis considers not only the costs of security controls and expected loss from security hacks, but also takes care of the profits expected from new opportunities. (Kommineni) When making a decision regarding an information security countermeasure, decision makers need to come up with the total cost of ownership of the countermeasure. In other words, the cost
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