Calculate the Annualized Loss Expectancy (ALE)

What is the formula to calculate the Annualized Loss Expectancy (ALE)?

How do you determine the Annualized Loss Expectancy (ALE) based on the following values?

- Asset value = 2400

- Exposure factor = 75%

- Annualized Rate of Occurrence = 0.25

Formula to Calculate ALE

To calculate the Annualized Loss Expectancy (ALE), you need to multiply the asset value by the exposure factor and the annualized rate of occurrence.

The Annualized Loss Expectancy (ALE) is a vital metric used in risk management to estimate the potential financial loss tied to a specific threat or risk facing a key company asset. In this scenario, the ALE is calculated using the following inputs:

- Asset value: $2400

- Exposure factor: 75%

- Annualized Rate of Occurrence: 0.25

Firstly, we need to convert the exposure factor from a percentage to a decimal by dividing it by 100. Thus, 75% becomes 0.75.

Next, you apply the formula for ALE calculation:

ALE = Asset value * Exposure factor * Annualized Rate of Occurrence

Substitute the given values into the formula:

ALE = 2400 * 0.75 * 0.25

By multiplying the values together, you obtain the ALE:

ALE = 450

Hence, the Annualized Loss Expectancy (ALE) for the key company asset is $450. This metric aids organizations in assessing the potential losses associated with risks and threats, enabling them to implement appropriate mitigation strategies.