Calculating Risk

Single Loss Expectancy (SLE)

The cost of a single loss when it occurs. This loss can be a critical failure, or it can be the result of an attack.

Annualized Rate of Occurrence (ARO)

The expected frequency that a specific threat or risk will occur (in other words, become realized) within a single year. Also known as probability determination.

Exposure Factor

The percentage of loss that an organization would experience if a specific asset were violated by a realized risk. Also known as loss potential.

Annualized Loss Expectancy (ALE)

The possible yearly cost of all instances of a specific realized threat against a specific asset. The ALE is calculated using the formula ALE = single loss expectancy (SLE) * annualized rate of occurrence (ARO).

Safeguard Evaluation

ALE 1 (before) - ALE2 (after) - Annual safeguard cost