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Difficulty: EasyRisk Identification, Assessment, and Response Strategies

An organization determines that the Single Loss Expectancy (SLE) for a critical server data breach is $40,000. Historical security assessment data indicates an Annual Rate of Occurrence (ARO) of 0.25 for this event. What is the Annual Loss Expectancy (ALE) associated with this risk?

  1. $10,000Answer
  2. B
    $40,000
  3. C
    $160,000
  4. D
    $100,000

Answer

$10,000
The Annual Loss Expectancy (ALE) is determined using the quantitative risk formula ALE = SLE * ARO. Multiplying the Single Loss Expectancy (40,000)bytheAnnualRateofOccurrence(0.25)resultsinanALEof40,000) by the Annual Rate of Occurrence (0.25) results in an ALE of 10,000.

Step-by-Step Solution

1
Identify the given quantitative metrics from the scenario
Single Loss Expectancy (SLE) = $40,000; Annual Rate of Occurrence (ARO) = 0.25
These variables are the essential inputs for determining annual financial risk.
2
Apply the quantitative risk assessment formula for Annual Loss Expectancy
ALE = SLE * ARO
ALE measures expected annual financial loss by weighting single incident impact by yearly frequency.
3
Multiply SLE by ARO
40,000∗0.25=40,000 * 0.25 = 10,000
Performing this calculation yields the expected annual cost of the risk.

Key Concept

Quantitative Risk Assessment (ALE Calculation)
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Topics

Risk Identification, Assessment, and Response Strategies

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