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It is difficult to evaluate security expenditures using traditional ROI calculations because the return on security “investments” are not based on tangibles such as profits or incomes. Instead, returns on security investments come in the form of events that do not happen. Companies should use the Security Risk Equation, which defines security risk by three variables: threat, vulnerability, and consequence, as well as the risk-based return on investment (RROI) equation. RROI can be used to evaluate competing proposals for security initiatives.