1. What is the ALE Formula?

The ALE (Annual Loss Expectancy) formula calculates the expected monetary loss from a risk over one year. It's a fundamental concept in risk management and information security.

2. How Does the Calculator Work?

The calculator uses the ALE equation:

Where:

• \( SLE \) — Single Loss Expectancy (cost of one occurrence)
• \( ARO \) — Annual Rate of Occurrence (expected occurrences per year)

Explanation: The equation multiplies the cost of a single incident by how often it's expected to occur in a year.

3. Importance of ALE Calculation

Details: ALE helps organizations quantify risk exposure, prioritize security investments, and make cost-benefit decisions about risk mitigation.

4. Using the Calculator

Tips: Enter SLE in dollars and ARO as a decimal number (e.g., 0.5 for twice every four years). Both values must be non-negative.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between ALE and SLE?
A: SLE is the cost of one incident, while ALE is the expected annual cost considering how often incidents occur.

Q2: How is ARO determined?
A: ARO is typically based on historical data, industry statistics, or expert estimates of event frequency.

Q3: What costs should be included in SLE?
A: SLE should include direct costs (repairs, fines) and indirect costs (downtime, reputation damage, lost productivity).

Q4: How accurate are ALE calculations?
A: Accuracy depends on the quality of SLE and ARO estimates. They're best used for comparative analysis rather than absolute values.

Q5: How is ALE used in risk management?
A: ALE helps compare risks and justify security budgets (e.g., if a control costs less than the ALE it reduces, it may be worth implementing).