Our Enhance Risk Management offering includes a quantitative risk assessment using the Annualized Loss Expectancy Methodology. This methodology delivers a more precise calculation of a risk in terms of monetary loss.
In the risk assessment workflow, you can now calculate the Single Loss Expectancy (SLE) and the Annual Loss Expectancy (ALE). The SLE calculates your financial loss due to a single event based on the value of the asset and the percentage of the asset that would be impacted. The ALE calculates your annual losses based on the SLE, the rate an event could occur in a year, and how certain or uncertain you are about the numbers you provide. By calculating the SLE and ALE of an asset you can make objective decisions to reduce risk and avoid potential losses for your growing organization.
This quantitative risk assessment is for Enhanced Risk Management users. To complete the assessment, head to the risk assessment workflow in the Risk Management module of the platform. You will find the quantitative risk assessment during the “assessment’ step in the workflow.
Single Loss Expectancy (SLE) = asset value x exposure factor
Asset value is the monetary value of the asset at risk.
Exposure factor is the percentage of the asset that would be lost if the threat became a reality. At times, the exposure rate can be greater than 100%, such as during a liability lawsuit.
For example, if the asset is worth $100,000 but only half of it is at risk then the SLE is $50,000.
$50,000 (SLE) = $100,000 (asset value) x 50% (exposure factor)
Annualized Loss Expectancy (ALE) = SLE x ARO x uncertainty
Start with the SLE calculated above.
Annualized Rate of Occurrence (ARO) is how often you expect a threat to happen in a year. If you expect it to happen three times a year, then input 3. If you think the event will happen once every two years, then you would input ½.
Uncertainty is a confidence score based on how confident you are in the numbers you provided for the SLE and ARO. A score of 1 means you are certain of the numbers provided. The higher the number, the more uncertainty, so a score of 2 says that the ALE could potentially be doubled.
For example, if the SLE is $50,000, and you expect the threat to occur 5 times a year but your uncertainty is 1.25.
$312,500 (ALE) = $50,000 (SLE) x 5 (ARO) x 1.25 (uncertainty)
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