Which of the following is true for Single loss expectancy (SLE), Annual rate of occurrence (ARO), and Annual loss expectancy (ALE)?
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A. B. C. D.D.
A quantitative risk assessment quantifies risk in terms of numbers such as dollar values.
This involves gathering data and then entering it into standard formulas.
The results can help in identifying the priority of risks.
These results are also used to determine the effectiveness of controls.
Some of the terms associated with quantitative risk assessments are: -> Single loss expectancy (SLE)-It refers to the total loss expected from a single incident.
This incident can occur when vulnerability is being exploited by threat.
The loss is expressed as a dollar value such as $1,000
It includes the value of data, software, and hardware.
SLE = Asset value * Exposure factor -> Annual rate of occurrence (ARO)-It refers to the number of times expected for an incident to occur in a year.
If an incident occurred twice a month in the past year, the ARO is 24
Assuming nothing changes, it is likely that it will occur 24 times next year.
Annual loss expectancy (ALE)-It is the expected loss for a year.
ALE is calculated by multiplying SLE with ARO.
Because SLE is a given in a dollar value, ALE is also given in a dollar value.
For example, if the SLE is $1,000 and the ARO is 24, the ALE is $24,000
-> ALE = SLE * ARO Safeguard value-This is the cost of a control.
Controls are used to mitigate risk.
For example, antivirus software of an average cost of $50 for each computer.
If there are 50 computers, the safeguard value is $2,500
A, B, C: These are wrong formulas and are not used in quantitative risk assessment.
Single Loss Expectancy (SLE), Annual Rate of Occurrence (ARO), and Annual Loss Expectancy (ALE) are used to calculate the expected loss of a potential risk.
Single Loss Expectancy (SLE) is the amount of loss that would occur if a specific risk event were to happen. It is calculated as the product of the asset value (AV) and the exposure factor (EF).
SLE = AV x EF
Annual Rate of Occurrence (ARO) is the estimated frequency with which a risk event will occur in a year.
Annual Loss Expectancy (ALE) is the expected monetary loss per year that results from a risk. It is calculated by multiplying the SLE by the ARO.
ALE = SLE x ARO
From the above formulas, we can see that the correct answer is D, ALE = ARO x SLE, as it represents the formula to calculate the Annual Loss Expectancy.
Option A (ALE= ARO/SLE) is incorrect as it represents an incorrect calculation, as it would lead to a value less than SLE, which is not possible.
Option B (ARO= SLE/ALE) is also incorrect as it represents an incorrect calculation, as it would lead to a value greater than 1, which is not possible.
Option C (ARO= ALE*SLE) is incorrect as it represents an incorrect calculation and cannot be used to calculate either ARO or ALE.