This is the basic process of risk management.
Risk is the possibility of damage happening and the ramifications of such damage should it occur. Information risk management (IRM) is the process of identifying and assessing risk, reducing it to an acceptable level, and implementing the right mechanisms to maintain that level. There is no such thing as a 100 percent secure environment. Every environment has vulnerabilities and threats to a certain degree.
The skill is in identifying these threats, assessing the probability of them actually occurring and the damage they could cause, and then taking the right steps to reduce the overall level of risk in the environment to what the organization identifies as acceptable.
Proper risk management requires a strong commitment from senior management, a documented process that supports the organization's mission, an information risk management (IRM) policy and a delegated IRM team. Once you've identified your company's acceptable level of risk, you need to develop an information risk management policy.
The IRM policy should be a subset of the organization's overall risk management policy (risks to a company include more than just information security issues) and should be mapped to the organizational security policies, which lay out the acceptable risk and the role of security as a whole in the organization. The IRM policy is focused on risk management while the security policy is very high-level and addresses all aspects of security. The IRM policy should address the following items:
Objectives of IRM team Level of risk the company will accept and what is considered an acceptable risk (as defined in the previous article) Formal processes of risk identification Connection between the IRM policy and the organization's strategic planning processes Responsibilities that fall under IRM and the roles that are to fulfill them Mapping of risk to internal controls Approach for changing staff behaviors and resource allocation in response to risk analysis Mapping of risks to performance targets and budgets Key indicators to monitor the effectiveness of controls Shon Harris provides a 10,000-foot view of the risk management process below: A big question that companies have to deal with is, "What is enough security?" This can be restated as, "What is our acceptable risk level?" These two questions have an inverse relationship. You can't know what constitutes enough security unless you know your necessary baseline risk level.
To set an enterprise-wide acceptable risk level for a company, a few things need to be investigated and understood. A company must understand its federal and state legal requirements, its regulatory requirements, its business drivers and objectives, and it must carry out a risk and threat analysis. (I will dig deeper into formalized risk analysis processes in a later article, but for now we will take a broad approach.) The result of these findings is then used to define the company's acceptable risk level, which is then outlined in security policies, standards, guidelines and procedures.
Although there are different methodologies for enterprise risk management, the core components of any risk analysis is made up of the following:
Identify company assets Assign a value to each asset Identify each asset's vulnerabilities and associated threats Calculate the risk for the identified assets
Once these steps are finished, then the risk analysis team can identify the necessary countermeasures to mitigate the calculated risks, carry out cost/benefit analysis for these countermeasures and report to senior management their findings.
When we look at information security, there are several types of risk a corporation needs to be aware of and address properly. The following items touch on the major categories: Physical damage Fire, water, vandalism, power loss, and natural disasters
Human interaction Accidental or intentional action or inaction that can disrupt productivity
Equipment malfunction Failure of systems and peripheral devices
Inside and outside attacks Hacking, cracking, and attacking
Misuse of data Sharing trade secrets, fraud, espionage, and theft
Loss of data Intentional or unintentional loss of information through destructive means
Application error Computation errors, input errors, and buffer overflows
The following answers are incorrect:
The process of eliminating the risk is not the best answer as risk cannot be totally
eliminated.
The process of assessing the risks is also not the best answer.
The process of transferring risk is also not the best answer and is one of the ways of
handling a risk after a risk analysis has been performed.
References:
Shon Harris , AIO v3 , Chapter 3: Security Management Practices , Page: 66-68
and
http://searchsecurity.techtarget.com/tip/Understanding-risk

Explanation/Reference:
In a lattice model, there are pairs of elements that have the least upper bound of values and greatest lower bound of values.
Reference(s) used for this question:
KRUTZ, Ronald L. & VINES, Russel D., The CISSP Prep Guide: Mastering the Ten Domains of Computer Security, 2001, John Wiley & Sons, Page 34.

The security officer would be the best person to oversea the development of such policies.
Security officers and their teams have typically been charged with the responsibility of creating the security policies. The policies must be written and communicated appropriately to ensure that they can be understood by the end users. Policies that are poorly written, or written at too high of an education level (common industry practice is to focus the content for general users at the sixth- to eighth-grade reading level), will not be understood.
Implementing security policies and the items that support them shows due care by the company and its management staff. Informing employees of what is expected of them and the consequences of noncompliance can come down to a liability issue.
While security officers may be responsible for the development of the security policies, the effort should be collaborative to ensure that the business issues are addressed.
The security officers will get better corporate support by including other areas in policy development. This helps build buy-in by these areas as they take on a greater ownership of the final product. Consider including areas such as HR, legal, compliance, various IT areas and specific business area representatives who represent critical business units.
When policies are developed solely within the IT department and then distributed without business input, they are likely to miss important business considerations. Once policy documents have been created, the basis for ensuring compliance is established. Depending on the organization, additional documentation may be necessary to support policy. This support may come in the form of additional controls described in standards, baselines, or procedures to help personnel with compliance. An important step after documentation is to make the most current version of the documents readily accessible to those who are expected to follow them. Many organizations place the documents on their intranets or in shared file folders to facilitate their accessibility. Such placement of these documents plus checklists, forms, and sample documents can make awareness more effective.
For your exam you should know the information below:
End User - The end user is responsible for protecting information assets on a daily basis through adherence to the security policies that have been communicated.
Executive Management/Senior Management - Executive management maintains the overall responsibility for protection of the information assets. The business operations are dependent upon information being available, accurate, and protected from individuals without a need to know.
Security Officer - The security officer directs, coordinates, plans, and organizes information security activities throughout the organization. The security officer works with many different individuals, such as executive management, management of the business units, technical staff, business partners, auditors, and third parties such as vendors. The security officer and his or her team are responsible for the design, implementation, management, and review of the organization's security policies, standards, procedures, baselines, and guidelines.
Information Systems Security Professional- Drafting of security policies, standards and supporting guidelines, procedures, and baselines is coordinated through these individuals. Guidance is provided for technical security issues, and emerging threats are considered for the adoption of new policies. Activities such as interpretation of government regulations and industry trends and analysis of vendor solutions to include in the security architecture that advances the security of the organization are performed in this role.
Data/Information/Business/System Owners - A business executive or manager is typically responsible for an information asset. These are the individuals that assign the appropriate classification to information assets. They ensure that the business information is protected with appropriate controls. Periodically, the information asset owners need to review the classification and access rights associated with information assets. The owners, or their delegates, may be required to approve access to the information. Owners also need to determine the criticality, sensitivity, retention, backups, and safeguards for the information. Owners or their delegates are responsible for understanding the risks that exist with regards to the information that they control.
Data/Information Custodian/Steward - A data custodian is an individual or function that takes care of the information on behalf of the owner. These individuals ensure that the information is available to the end users and is backed up to enable recovery in the event of data loss or corruption. Information may be stored in files, databases, or systems whose technical infrastructure must be managed, by systems administrators. This group administers access rights to the information assets.
Information Systems Auditor- IT auditors determine whether users, owners, custodians, systems, and networks are in compliance with the security policies, procedures, standards, baselines, designs, architectures, management direction, and other requirements placed on systems. The auditors provide independent assurance to the management on the appropriateness of the security controls. The auditor examines the information systems and determines whether they are designed, configured, implemented, operated, and managed in a way ensuring that the organizational objectives are being achieved. The auditors provide top company management with an independent view of the controls and their effectiveness.
Business Continuity Planner - Business continuity planners develop contingency plans to prepare for any occurrence that could have the ability to impact the company's objectives negatively. Threats may include earthquakes, tornadoes, hurricanes, blackouts, changes in the economic/political climate, terrorist activities, fire, or other major actions potentially causing significant harm. The business continuity planner ensures that business processes can continue through the disaster and coordinates those activities with the business areas and information technology personnel responsible for disaster recovery.
Information Systems/ Technology Professionals- These personnel are responsible for designing security controls into information systems, testing the controls, and implementing the systems in production environments through agreed upon operating policies and procedures. The information systems professionals work with the business owners and the security professionals to ensure that the designed solution provides security controls commensurate with the acceptable criticality, sensitivity, and availability requirements of the application.
Security Administrator - A security administrator manages the user access request process and ensures that privileges are provided to those individuals who have been authorized for access by application/system/data owners. This individual has elevated privileges and creates and deletes accounts and access permissions. The security administrator also terminates access privileges when individuals leave their jobs or transfer between company divisions. The security administrator maintains records of access request approvals and produces reports of access rights for the auditor during testing in an access controls audit to demonstrate compliance with the policies.
Network/Systems Administrator - A systems administrator (sysadmin/netadmin) configures network and server hardware and the operating systems to ensure that the information can be available and accessible. The administrator maintains the computing infrastructure using tools and utilities such as patch management and software distribution mechanisms to install updates and test patches on organization computers. The administrator tests and implements system upgrades to ensure the continued reliability of the servers and network devices. The administrator provides vulnerability management through either commercial off the shelf (COTS) and/or non-COTS solutions to test the computing environment and mitigate vulnerabilities appropriately.
Physical Security - The individuals assigned to the physical security role establish relationships with external law enforcement, such as the local police agencies, state police, or the Federal Bureau of Investigation (FBI) to assist in investigations. Physical security personnel manage the installation, maintenance, and ongoing operation of the closed circuit television (CCTV) surveillance systems, burglar alarm systems, and card reader access control systems. Guards are placed where necessary as a deterrent to unauthorized access and to provide safety for the company employees. Physical security personnel interface with systems security, human resources, facilities, and legal and business areas to ensure that the practices are integrated.
Security Analyst - The security analyst role works at a higher, more strategic level than the previously described roles and helps develop policies, standards, and guidelines, as well as set various baselines. Whereas the previous roles are "in the weeds" and focus on pieces and parts of the security program, a security analyst helps define the security program elements and follows through to ensure the elements are being carried out and practiced properly. This person works more at a design level than at an implementation level.
Administrative Assistants/Secretaries - This role can be very important to information security; in many companies of smaller size, this may be the individual who greets visitors, signs packages in and out, recognizes individuals who desire to enter the offices, and serves as the phone screener for executives. These individuals may be subject to social engineering attacks, whereby the potential intruder attempts to solicit confidential information that may be used for a subsequent attack. Social engineers prey on the goodwill of the helpful individual to gain entry. A properly trained assistant will minimize the risk of divulging useful company information or of providing unauthorized entry.
Help Desk Administrator - As the name implies, the help desk is there to field questions from users that report system problems. Problems may include poor response time, potential virus infections, unauthorized access, inability to access system resources, or questions on the use of a program. The help desk is also often where the first indications of security issues and incidents will be seen. A help desk individual would contact the computer security incident response team (CIRT) when a situation meets the criteria developed by the team. The help desk resets passwords, resynchronizes/reinitializes tokens and smart cards, and resolves other problems with access control.
Supervisor - The supervisor role, also called user manager, is ultimately responsible for all user activity and any assets created and owned by these users. For example, suppose Kathy is the supervisor of ten employees. Her responsibilities would include ensuring that these employees understand their responsibilities with respect to security; making sure the employees' account information is up-to-date; and informing the security administrator when an employee is fired, suspended, or transferred. Any change that pertains to an employee's role within the company usually affects what access rights they should and should not have, so the user manager must inform the security administrator of these changes immediately.
Change Control Analyst Since the only thing that is constant is change, someone must make sure changes happen securely. The change control analyst is responsible for approving or rejecting requests to make changes to the network, systems, or software. This role must make certain that the change will not introduce any vulnerabilities, that it has been properly tested, and that it is properly rolled out. The change control analyst needs to understand how various changes can affect security, interoperability, performance, and productivity. Or, a company can choose to just roll out the change and see what happens.
The following answers are incorrect:
Systems Administrator - A systems administrator (sysadmin/netadmin) configures network and server hardware and the operating systems to ensure that the information can be available and accessible. The administrator maintains the computing infrastructure using tools and utilities such as patch management and software distribution mechanisms to install updates and test patches on organization computers. The administrator tests and implements system upgrades to ensure the continued reliability of the servers and network devices. The administrator provides vulnerability management through either commercial off the shelf (COTS) and/or non-COTS solutions to test the computing environment and mitigate vulnerabilities appropriately.
End User - The end user is responsible for protecting information assets on a daily basis through adherence to the security policies that have been communicated.
Security Administrator - A security administrator manages the user access request process and ensures that privileges are provided to those individuals who have been authorized for access by application/system/data owners. This individual has elevated privileges and creates and deletes accounts and access permissions. The security administrator also terminates access privileges when individuals leave their jobs or transfer between company divisions. The security administrator maintains records of access request approvals and produces reports of access rights for the auditor during testing in an access controls audit to demonstrate compliance with the policies.
Following reference(s) were/was used to create this question: CISA review manual 2014 Page number 109 Harris, Shon (2012-10-18). CISSP All-in-One Exam Guide, 6th Edition (p. 108). McGraw-Hill. Kindle Edition.

Explanation/Reference:
In cryptography, you always assume the "bad guy" has the encryption algorithm (indeed, many algorithms such as DES, Triple DES, AES, etc. are public domain). What the bad guy lacks is the key used to complete that algorithm and encrypt/decrypt information. Therefore, protection of the key, controlled distribution, scheduled key change, timely destruction, and several other factors require careful consideration. All of these factors are covered under the umbrella term of "key management".
Another significant consideration is the case of "data encryption as a method of protecting data" as the question states. If that data is to be stored over a long period of time (such as on backup), you must ensure that your key management scheme stores old keys for as long as they will be needed to decrypt the information they encrypted.
The other answers are not correct because:
"It should sometimes be used for password files." - Encryption is often used to encrypt passwords stored within password files, but it is not typically effective for the password file itself. On most systems, if a user cannot access the contents of a password file, they cannot authenticate. Encrypting the entire file prevents that access.
"It is usually easily administered." - Developments over the last several years have made cryptography significantly easier to manage and administer. But it remains a significant challenge. This is not a good answer.
"It makes few demands on system resources." - Cryptography is, essentially, a large complex mathematical algorithm. In order to encrypt and decrypt information, the system must perform this algorithm hundreds, thousands, or even millions/billions/trillions of times. This becomes system resource intensive, making this a very bad answer.
Reference:
Official ISC2 Guide page: 266 (poor explanation)
All in One Third Edition page: 657 (excellent explanation)
Key Management - Page 732, All in One Fourth Edition

Explanation/Reference:
Although TACACS+ provides better audit trails, event logging is a service that is provided with TACACS.
Source: KRUTZ, Ronald L & VINES, Russel D., The CISSP Prep Guide: Mastering the Ten Domains of Computer Security, John Wiley & Sons, 2001, Chapter 3: Telecommunications and Network Security (page
121).