What formula represents the calculation of ALE?

The formula for Annualized Loss Expectancy (ALE) is accurately represented by the calculation of ALE = Single Loss Expectancy (SLE) multiplied by the Annual Rate of Occurrence (ARO).

To understand why this is the correct formula, it's essential to grasp the components involved in calculating ALE. SLE is the expected monetary loss for each incident of a specific risk, while ARO is the estimated frequency with which that risk is expected to occur within a year. By multiplying SLE by ARO, you effectively project the total anticipated annual loss from that risk, thus providing a comprehensive view of the financial impact of potential security threats.

This calculation is crucial for organizations as it helps prioritize risks and allocate resources effectively to mitigate them. It enables decision-makers to understand the financial implications of various security breaches and plan accordingly.