Annualized loss expectancy

The annualized loss expectancy (ALE) is the product of the annual rate of occurrence (ARO) and the single loss expectancy. It is mathematically expressed as:

${Annualized\ Loss\ Expectancy\ (ALE)} = {Annual\ Rate\ of\ Occurrence\ (ARO)\ } \times {\ Single\ Loss\ Expectancy\ (SLE)}$

Suppose than an asset is valued at $100,000, and the exposure factor (EF) for this asset is 25%. The single loss expectancy (SLE) then, is 25% * $100,000, or $25,000.

The annualized loss expectancy is the product of the annual rate of occurrence (ARO) and the single loss expectancy. ALE = ARO * SLE

For an annual rate of occurrence of one, the annualized loss expectancy is 1 * $25,000, or $25,000.

For an ARO of three, the equation is: ALE = 3 * $25,000

Therefore: ALE = $75,000