When can you use ALE formula?
When calculating the amount of revenue loss your company or organization can anticipate due to a specific product you use over a predetermined period of time, you may use an ALE formula. Although not a guarantee, this sum reflects the amount that the company might lose in that particular year. You can prepare for this loss and make the necessary adjustments to accommodate them by calculating this number.
For instance, if you determine that you will lose more money than anticipated, you can change the company budget to spend less on specific items to make up for the difference or lessen the amount of loss experienced.
What is the ALE formula?
ALE = SLE ARO
An ALE formula aids in estimating how much you’ll likely lose over the course of a year as a result of a particular asset. Finding the product of the asset value (AV) and the exposure factor (EF) produces the single loss expectancy (SLE) number, which is then multiplied by the ALE number. Next, you add the annualized rate of occurrence (ARO) to that number. The ARO and SLE, which are the numbers used in the mathematical formula and full ALE formula, can be multiplied to determine the end number. Using the complete version of the formula, which reads as follows, you can determine your ALE:
ALE = SLE ARO
How to calculate the ALE formula
If you take the following few steps, calculating an ALE formula can be a straightforward process:
1. Find your EF and AV numbers
In order to use them in the SLE formula, locate your EF and AV numbers. The loss that results from the threat or risk in question is referred to as the exposure factor, and is typically represented by a percentage value. The term “asset value” describes the monetary value of the assets. AV typically declines over time.
2. Insert your new numbers into the SLE formula
You must first determine the SLE number in order to calculate your ALE. You can do this by applying the EF and AV numbers you previously identified to the following formula: SLE = AV EF. A complete SLE formula might look something like this: SLE = $20,000 0. 4.
3. Find the ALE
Using the formula ALE: ALE = SLE ARO, you can use your SLE number after determining it in the SLE formula. The estimated number of times this threat or risk materializes over the course of a year is known as the annualized rate of occurrence, or ARO. ARO typically appears as a percentage value. A complete ALE formula might look something like this, for instance: ALE = 12,000 0. 5. You can then find the ALE by performing that calculation.
Examples of ALE formula
Examples of applying the ALE formula to determine how much loss a company can reasonably anticipate in specific circumstances are useful. To serve as a guide, look at these three examples of this formula:
Example 1
A packaging machine owned by a boxing business is estimated to be worth $100,000. The exposure factor for that asset is 30%, or 0. 3. With this knowledge, the business can perform the SLE formula calculation as follows:
SLE = $100,000 0.3
$100,000 0.3 = 30,000
SLE = 30,000.
The business then takes into account the ARO, which is 40%, or 0. 4. To determine the ALE value, multiply this number by the SLE number.
ALE = SLE ARO
ALE = 30,000 0.4
30,000 0.4 = 12,000
ALE = 12,000.
The boxing business can anticipate an annualized loss of up to $12,000 from the packaging machine.
Example 2
A hair dryer owned by a barbershop is valued at $3,000. The exposure factor for said asset is 20%, or 0. 2. Using this data, the company enters the following numbers into the SLE formula:
SLE = $3,000 0.2
$3,000 0.2 = 600
SLE = 600
The business then determines the ARO number, which is 20% or 0. 2. The business then applies the ALE formula using the SLE number and the ARO number:
ALE = SLE ARO
ALE = 600 0.2
600 0.2 = 120
ALE = 120
The hair dryer’s annualized loss potential for the barbershop is up to $120.
Example 3
A street sweeper owned by a zoo is valued at about $15,000. The exposure factor for this asset is 40%, or 0. 4. These numbers apply to the SLE formula:
SLE = $30,000 0.4
0.4 $15,000 = 6,000
SLE = 6,000
The zoo next takes into account the ARO number, which is 5%, or 0. 5. The zoo can use the ALE formula by using the SLE number and ARO number as follows:
ALE = SLE * ARO
ALE = 6,000 * 0.4
6,000 * 0.4 = 2,400
ALE = $2,400
Consequently, the zoo’s estimated annual loss for the street sweeper could reach $2,400.
Information Security Equation Question: ALE = AVEF x
FAQ
How is ale calculated?
The formula for calculating the ALE is as follows: ALE = SLE x ARO. The ALE represents the annual average loss over a period of many years for a specific asset. Some risk assessment professionals add another factor: uncertainty.
How is SLE calculated?
The formula is SLE = AV x EF, where EF stands for exposure factor. The loss that will occur to the asset as a result of the threat is described by the exposure factor and is expressed as a percentage of value. In our example, SLE is $30,000 with an estimated EF of 0. 3.
How is ale risk calculated?
An estimated frequency of the threat occurring over the course of a year is known as the annualized rate of occurrence (ARO). ARO is used to calculate ALE (annualized loss expectancy). ALE is calculated as follows: ALE = SLE x ARO. ALE is $15,000 ($30,000 x 0. 5), when ARO is estimated to be 0. 5 (once in two years).
What is Aro and SLE?
The annual rate of occurrence (ARO) and the single loss expectancy (SLE) are combined to create the annualized loss expectancy (ALE). The exposure factor (EF) for an asset with a value of $100,000 and a 25% exposure rate is expressed mathematically as follows:
