Which equation do you use to calculate the loss for a single threat occurrence?

The possible yearly cost of all instances of a specific realized threat against a specific asset. The ALE is calculated using the formula ALE = single loss expectancy (SLE) * annualized rate of occurrence (ARO). In risk assessment, the average monetary value of losses per year.

Similar items:

The cost associated with a single realized risk against a specific asset. The SLE indicates the exact amount of loss an organization would experience if an asset were harmed by a specific threat. SLE = asset value ($) - exposure factor (EF).
[view]

The expected frequency that a specific threat or risk will occur (in other words, become realized) within a single year. Also known as probability determination.
[view]

Possibility that a particular threat will adversely impact an information system by exploiting a particular vulnerability. The likelihood that any specific threat will exploit a specific vulnerability to cause harm to an asset. Risk is an assessment of probability, possibility, or chance. Risk = threat - vulnerability. The probability that a particular security threat will exploit a particular vulnerability.
[view]

An analysis that examines an organization’s information resources, its existing controls, and its remaining organization and computer system vulnerabilities. It combines the loss potential for each resource or combination of resources with an estimated rate of occurrence to establish a potential level of damage in dollars or other assets. An element of risk management that includes analyzing an environment for risks, evaluating each risk as to its likelihood of occurring and cost of damage, assessing the cost of various countermeasures for each risk, and creating a cost/benefit report for safeguards to present to upper management. Examination of information to identify the risk to an information system.
[view]

A detailed process of identifying factors that could damage or disclose data, evaluating those factors in light of data value and countermeasure cost, and implementing cost-effective solutions for mitigating or reducing risk. Process of managing risks to agency operations (including mission, functions, image, or reputation), agency assets, or individuals resulting from the operation of an information system. It includes risk assessment; costbenefit analysis; the selection, implementation, and assessment of security controls; and the formal authorization to operate the system. The process considers effectiveness, efficiency, and constraints due to laws, directives, policies, or regulations. (NIST Special Pub 80053)The discipline of identifying and measuring security risks associated with an information system, and controlling and reducing those risks to an acceptable level. The goal of risk management is to invest organizational resources to mitigate security risks in a costeffective manner, while enabling timely and effective mission accomplishment. Risk management is an important aspect of information assurance and defenseindepth.
[view]

There are no comments yet.

Authentication required

You must log in to post a comment.

Single-loss expectancy (SLE) refers to the expected monetary loss each time an asset is at risk. It’s a term that’s most commonly used during risk assessment and attempts to put a monetary value on each single threat.

Where have you heard about single-loss expectancy?

You may have heard single-loss expectancy mentioned in conjunction with annualised loss expectancy (ALE), as it is required for this calculation.

If you’ve looked into a business’ financial records you may have come across these terms, especially where assets are at risk from a specific threat.

What you need to know about single-loss expectancy.

The equation for single-loss expectancy is:

SLE = AV * EF

Asset value (AV) is the value per share as determined on a specific date or time. Exposure factor (EF) is measured as a percentage and calculates the potential loss that could occur to an asset if a specific threat is realised.

For example, if an asset is valued at £100,000 and the exposure factor for the asset is 25%, the single-loss expectancy equals £25,000 (£100,000/25% = £25,000).

As an investor you should be looking for companies with a low single-loss expectancy in order to limit your risk.

Find out more about single-loss expectancy.

Learn more about how you can limit your risk exposure in order to maximise profits and reduce the risk of loss.

Risk is related with vulnerabilities, which threaten confidentiality (C), integrity (I), and availability (A) of the assets. This is described as the CIA Triad.

1. Confidentiality is about not disclosing sensitive information to other people.
2. Integrity is about preserving the state of the system—we don’t want attackers to change our data.
3. We do want our systems to be up and running. Hence availability is considered.

Quantitative Analysis

Quantitative analysis is about assigning monetary values to risk components. Let’s analyze the example of hard drive failure to better understand how it works.
Let’s first describe the threat, vulnerability, and risk.

1. Threat—hard drive failure
2. Vulnerability—backups done rarely
3. Risk—loss of data

The asset is data. The value of the asset (AV) is assessed first—$100,000, for example.
Let’s discuss the single loss expectancy (SLE). It contains information about the potential loss when a threat occurs (expressed in monetary values). It is calculated as follows: SLE = AV x EF, where EF is exposure factor. Exposure factor describes the loss that will happen to the asset as a result of the threat (expressed as percentage value). SLE is $30,000 in our example, when EF is estimated to be 0.3.
Let’s continue this case. Annualized rate of occurrence (ARO) is described as an estimated frequency of the threat occurring in one year. ARO is used to calculate ALE (annualized loss expectancy). ALE is calculated as follows: ALE = SLE x ARO. ALE is $15,000 ($30,000 x 0.5), when ARO is estimated to be 0.5 (once in two years). As we can see, the risk is about the impact of the vulnerability on the business and the probability of the vulnerability to be exploited.

Cost/Benefit Analysis

Let’s continue the example from the previous section. Annualized loss expectancy (ALE) is $15,000. This means that the potential loss is $15,000 in one year, when the data is lost as a result of the hard drive failure. A countermeasure can be used to reduce the potential loss. It happens when the management decides to reduce the risk. This countermeasure should not cost more than $15,000 per year. Otherwise it wouldn’t be logical from a business point of view (we don’t want to spend more money than we can potentially lose). This is basically how cost/benefit analysis works.
Let’s see how the annual value of the countermeasure to the company (COUNTERMEASURE_VALUE) can be calculated:
COUNTERMEASURE_VALUE = ALE_PREVIOUS – ALE_NOW – COUNTERMEASURE_COST, where
ALE_PREVIOUS: ALE before implementing the countermeasure
ALE_NOW: ALE after implementing the countermeasure
COUTERMEASURE_COST: annualized cost of countermeasure (please note that it’s not only purchasing cost—maintenance cost is included).

Risk Handling

Risk can be handled in the following ways:

1. Risk reduction—risk is reduced to an acceptable level (countermeasures implemented; types of countermeasures are described in the next section).
2. Risk avoidance—stopping the activity, which leads to the risk
3. Risk transference—the risk is transferred to the insurance company
4. Risk acceptance—accepting the cost of potential loss (no countermeasures)

Countermeasures

Let’s discuss the types of countermeasures (also called controls) that are implemented in the case of risk reduction. There are three types of countermeasures:

1. Administrative (e.g., security awareness training should not be forgotten, because people are the weakest point in the security chain)
2. Technical (e.g., firewall)
3. Physical (e.g., locks)
   

Countermeasures are implemented to reduce the risk. We talk about total risk when no countermeasure is implemented. Let’s assume now that the countermeasure is implemented. Perfect security doesn’t exist and there is some risk left. This is a residual risk.

How is EF calculated in SLE?

What is Aro formula?

What type of risk analysis is used to calculate an annual loss of expectancy?

What is SLE Aro and ale?