The formula to calculate the Annual Loss Expectancy is:
ALE=SLE×ARO
Where:
Annual Loss Expectancy (ALE) is a measure used in risk management to estimate the potential annual financial loss due to a specific risk. It is calculated by multiplying the single loss expectancy (SLE) by the annualized rate of occurrence (ARO). This metric helps organizations understand the financial impact of risks and prioritize their mitigation efforts.
Let's assume the following values:
Using the formula:
ALE=10000×0.5=5000 dollars
The Annual Loss Expectancy is $5000.