CompTIA Cloud Essentials+ (CLO-002)Governance, Risk, Compliance and SecurityHard
A financial services firm's risk team estimates that a specific type of cloud service outage would cause $50,000 in losses each time it occurs, and historical data suggests this outage happens 3 times per year. What is the annualized loss expectancy (ALE) for this risk?
- A$50,000
- B$150,000
- C$16,667
- D$200,000
Show answer & explanationAnswer & explanation
Correct answer: B. $150,000
ALE = Single Loss Expectancy (SLE) × Annualized Rate of Occurrence (ARO) = $50,000 × 3 = $150,000. This quantitative measure helps prioritize risk treatment decisions and justify security spending.
Why the other options are wrong
- A. This is only the SLE, not accounting for frequency.
- C. This results from dividing rather than multiplying SLE by ARO.
- D. This overstates the loss and does not match the given figures.
Annualized Loss Expectancy (ALE)
A quantitative risk metric calculated as SLE multiplied by ARO, representing the expected yearly financial loss from a given risk.
- SLE = single loss expectancy per incident
- ARO = annualized rate of occurrence (frequency per year)
- ALE = SLE × ARO
- Used to justify cost of controls (should not exceed ALE)
Memory trick: 'ALE Sails Away' — multiply the single loss by how often it hits per year.