Determining ALE: Calculating Two Factors

AD.

To determine the Annualized Loss Expectancy (ALE) of a particular risk, the following two factors must be calculated:

1. Single Loss Expectancy (SLE): It is the cost of a single occurrence of a risk. It is calculated by multiplying the value of the asset at risk by the exposure factor (EF) which is the percentage of loss expected from the risk.

SLE = Asset Value x EF

2. Annualized Rate of Occurrence (ARO): It is the estimated frequency of occurrence of a risk in a year.

Once you have calculated the SLE and ARO, you can calculate the ALE by multiplying the SLE and ARO.

ALE = SLE x ARO

The ALE is an important metric that helps organizations to prioritize their security risks and determine the cost-effectiveness of implementing security controls. The ALE represents the expected monetary loss that an organization may face in a year due to a particular risk. By comparing the ALE of different risks, organizations can decide which risks are most critical and need to be addressed first.

To summarize, to determine the ALE of a particular risk, the SLE and ARO must be calculated. The SLE is the cost of a single occurrence of the risk, and the ARO is the estimated frequency of occurrence of the risk in a year.