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Difficulty: MediumRisk Identification, Assessment, and Response Strategies

A biotechnology firm operates an automated gene-sequencing platform with an estimated Asset Value (AVAV) of $1,500,000\$1,500,000. Security analysts assess that a major malware incident would result in an Exposure Factor (EFEF) of 0.300.30. Threat intelligence estimates the Annual Rate of Occurrence (AROARO) for such an incident to be 0.200.20 (once every 5 years). What is the expected Annual Loss Expectancy (ALEALE) associated with this risk?

  1. $90,000\$90,000Answer
  2. B
    $300,000\$300,000
  3. C
    $450,000\$450,000
  4. D
    $2,250,000\$2,250,000

Answer

The Annual Loss Expectancy (ALEALE) is $90,000\$90,000.
The correct calculation follows quantitative risk assessment formulas: first, find Single Loss Expectancy using SLE=AV×EF=$1,500,000×0.30=$450,000SLE = AV \times EF = \$1,500,000 \times 0.30 = \$450,000. Next, calculate Annual Loss Expectancy using ALE=SLE×ARO=$450,000×0.20=$90,000ALE = SLE \times ARO = \$450,000 \times 0.20 = \$90,000.

Step-by-Step Solution

1
Calculate Single Loss Expectancy (SLE)
SLE=AV×EF=$1,500,000×0.30=$450,000SLE = AV \times EF = \$1,500,000 \times 0.30 = \$450,000
SLE represents the total monetary loss expected each time a specific threat is realized against the asset.
2
Calculate Annual Loss Expectancy (ALE)
ALE=SLE×ARO=$450,000×0.20=$90,000ALE = SLE \times ARO = \$450,000 \times 0.20 = \$90,000
ALE provides the expected financial loss per year by factoring in how frequently the incident occurs annually.

Key Concept

Quantitative Risk Assessment (ALE Calculation)
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Topics

Risk Identification, Assessment, and Response Strategies

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