What does ALE stand for in risk management?

• A. Asset Value
• B. Availability
• C. Annual Loss Expectancy
• D. Annualized Rate of Occurrence

Answer: (C)

Annual Loss Expectancy is the measured amount of money you expect to lose each year due to a specific risk. It combines two pieces: single loss expectancy and annualized rate of occurrence. The single loss expectancy represents the monetary loss from one incident, and is typically calculated as Asset Value times the Exposure Factor (the portion of the asset lost in a single event). The annualized rate of occurrence is how often you expect that incident to happen in a year. Multiply these to get ALE. For example, if an asset is worth $100,000 and the exposure factor is 50%, the SLE is $50,000. If you expect the event to occur 0.2 times per year, the ALE is $10,000 per year. This metric helps prioritize defenses by showing the expected yearly loss and how changes to SLE or ARO impact overall risk. Asset Value indicates the asset’s worth, Availability is a related security property, and the annualized rate of occurrence is the frequency used in the calculation, not the total yearly loss by itself.