Annualized loss expectancy
The annualized loss expectancy is the product of the annual rate of occurrence and the single loss expectancy. It is mathematically expressed as:
Suppose that an asset is valued at $100,000, and the Exposure Factor for this asset is 25%. The single loss expectancy then, is 25% * $100,000, or $25,000.
The annualized loss expectancy is the product of the annual rate of occurrence and the single loss expectancy.
ALE = ARO * SLE
For an annual rate of occurrence of one, the annualized loss expectancy is 1 * $25,000, or $25,000.
For an ARO of three, the equation is:
ALE = 3 * $25,000. Therefore:
ALE = $75,000
