A corporation has determined that the likelihood of a data breach in their system is once every five years. The estimated financial damage from a single breach event is $3 million. As the Security Analyst tasked with calculating the Annualized Loss Expectancy (ALE) for the data breach risk, which of the following correctly calculates the ALE?
Annualized Loss Expectancy is calculated by multiplying the Single Loss Expectancy (SLE) with the Annualized Rate of Occurrence (ARO). In this scenario, the SLE is $3 million per incident, and the ARO is once every five years, which is an ARO of 0.2 (1/5). Therefore, the ALE is $600,000 ($3 million x 0.2).
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What is Single Loss Expectancy (SLE)?
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How do you calculate Annualized Rate of Occurrence (ARO)?
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Why is calculating ALE important for a corporation?