Master the 2025 CRISC Challenge – Grab Your Risk Control Superpowers!

The formula for Annual Loss Expectancy (ALE) is essential for understanding the potential financial impact of risks faced by an organization. The correct formula, which involves calculating the Single Loss Expectancy (SLE) and the Annual Risk Occurrence (ARO), gives a clear estimate of the anticipated losses over a year.

Single Loss Expectancy represents the expected monetary loss each time a specific risk event occurs, and Annual Risk Occurrence indicates the number of times that event is likely to occur in a year. By multiplying these two values together, you derive the ALE, which quantifies the yearly financial impact of a particular risk. This formula allows organizations to prioritize their risk management efforts and allocate resources effectively.

The other choices do not accurately represent how ALE is determined. Some may involve elements of risk assessment but do not align with the established method for calculating Annual Loss Expectancy. Understanding this formula is crucial for risk management and reinforces the importance of quantifying risks for effective strategy development.