What is the purpose of Annualized Loss Expectancy (ALE)?

The purpose of Annualized Loss Expectancy (ALE) is to calculate the annual cost of a risk if it remains untreated. ALE is a key metric in risk management that helps organizations estimate the potential financial impact of specific risks over a one-year period. It takes into account the asset value and the probability of a risk event occurring, allowing organizations to prioritize their risk management efforts and allocate resources effectively.

By quantifying the potential financial loss due to risks, ALE enables decision-makers to make informed choices about risk mitigation strategies, insurance needs, and overall financial planning. This calculation is essential for understanding the trade-offs between implementing controls and accepting the risk, ultimately contributing to a more comprehensive risk management framework.