Calculating Annual Loss Expectancy (ALE)

ALE is calculated using the following parameters: 

• Asset value, e.g. the cost of a server or the cost to rebuilt a database. 
• Annualized Rate of Occurrence (ARO). For example, if a a threat, e.g. natural disaster like flood or a man made disaster, intentional or unintentional, like fire, occurs once every 10 years, the rate will be 1/10=0.1
•  Exposure factor: the percentage of damage each time threat occurs. 

Single Loss Expectancy (SLE) = Asset Value * Exposure Factor

ALE= SLE * ARO 

For example, to calculate ALE for a data centre, valued at $100,000 as the result of a flood,  

• in an area where a flood occurs once every 20 years (ARO of 1/20=0.05)
• and if occurs the damage to a data center is 55% (exposure factor of 0.55)

            SLE = $100,00 * 0.55 = $55,000 

            ALE = SLE * 0.05 = $2,750