A security analyst is calculating the annualized loss expectancy (ALE) for a server that processes credit card data. The server has a $100,000 asset value, and the exposure factor for a security breach is 0.4. Historical data shows that such breaches occur twice per year. What is the ALE?
SLE equals asset value multiplied by exposure factor: $100,000 × 0.4 = $40,000. ALE equals SLE multiplied by annualised rate of occurrence: $40,000 × 2 = $80,000. This matches the calculated annualised loss expectancy for the credit card server.
Why this answer
ALE is calculated as Single Loss Expectancy (SLE) multiplied by Annualized Rate of Occurrence (ARO). SLE = Asset Value × Exposure Factor = $100,000 × 0.4 = $40,000. ARO = 2 occurrences per year.
Therefore ALE = $40,000 × 2 = $80,000.
Exam trap
CAS-005 often tests whether candidates confuse SLE with ALE or forget to multiply by ARO; the trap is stopping at $40,000 or using the full asset value.
How to eliminate wrong answers
Option A is wrong because $100,000 is the asset value, not the ALE; it ignores both the exposure factor and the frequency. Option B is wrong because $40,000 is the SLE (the loss per single incident), not the annualized figure. Option D is wrong because $200,000 would result from multiplying the full asset value by 2 without applying the 0.4 exposure factor, which overstates the loss.