Calculating Annualized Loss Expectancy: Understanding Risk Analysis for Company Assets
What is the Annualized Loss Expectancy (ALE)?
The Annualized Loss Expectancy (ALE) is the expected loss from a given risk over one year. It is a crucial metric in risk analysis that helps organizations assess the potential financial impact of security breaches or threats to their assets. In this scenario, you have conducted a risk analysis to protect a key company asset and identified the following values:
- Asset value: $2400
- Exposure factor: 75
- Annualized Rate of Occurrence: 25
Calculating ALE
To calculate the Annualized Loss Expectancy (ALE) for a particular risk, the following formula is used:
ALE = Asset Value × Exposure Factor × Annualized Rate of Occurrence
In this example, the ALE calculation would be:
ALE = $2400 × 75 × 25 = $450,000
Understanding the Results
Therefore, the expected loss from this risk over one year is $450,000. This calculation provides valuable insights into the potential financial impact of a specific risk. It enables organizations to make informed decisions on how to best mitigate or manage the risk effectively.
By understanding the ALE, companies can prioritize risk management efforts and allocate resources wisely to protect their valuable assets.
You have conducted a risk analysis to protect a key company asset. You identify the following values: Asset value = 2400, Exposure factor = 75, Annualized Rate of Occurrence = 25. What is the Annualized Loss Expectancy (ALE)?
The Annualized Loss Expectancy (ALE) is the expected loss from a given risk over one year which is $450,000. To calculate the ALE for a particular risk, the following formula is used: ALE = Asset Value × Exposure Factor × Annualized Rate of Occurrence. In this example, the ALE calculation would be ALE = $2400 × 75 × 25 = $450,000. This means that the expected loss from this risk over one year is $450,000. This calculation is a useful tool for determining the potential financial impact of a particular risk and can help inform decisions about how to best mitigate or manage that risk.