easy
Single Answer
0Kimon is the risk manager for Atwood Landing, a resort community in the midwestern United States. The resort's main data center is located in northern Indiana in an area that is prone to tornados. Kimon recently undertook a replacement cost analysis and determined that rebuilding and reconfiguring the data center would cost $10 million. Kimon consulted with tornado experts, data center specialists, and structural engineers. Together, they determined that a typical tornado would cause approximately $5 million of damage to the facility. The meteorologists determined that Atwood's facility lies in an area where they are likely to experience a tornado once every 200 years. Based upon the information in this scenario, what is the exposure factor for the effect of a tornado on Atwood Landing's data center?
Answer Options
A
10%
B
25%
C
50%
D
75%
Correct Answer: C
Explanation
The exposure factor is the percentage of the facility that risk managers expect will be damaged if a risk materializes. It is calculated by dividing the amount of damage by the asset value. In this case, that is $5 million in damage divided by the $10 million facility value, or 50%.