Break-Even Analysis
Break-Even Analysis : Definition: variant of cost-benefit analysis that estimates the threshold value at which a policy alternative's costs equal its benefits. Sample Usage: Break-even analysis showed that the proposed security policy would have to reduce the probability of attack by two orders of magnitude for its benefits to equal its costs; since this was judged unlikely, the proposed security policy was rejected. Annotation: Analysts have applied this technique to homeland security by calculating the minimum threat probability required for the risk reduction benefits of a security policy to exceed the costs. If decision makers believe the actual threat is greater than the calculated break-even threat level, then the expected benefits of the policy exceed the costs. The technique also may be applied to other uncertain parameters in the analysis. See also: Return On Investment (risk)
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