1. What is Loss Expectancy?

Loss Expectancy (LE) is a risk assessment calculation that estimates the expected monetary loss from a risk over a given time period. It combines the asset value, exposure factor, and annual rate of occurrence to quantify potential losses.

2. How Does the Calculator Work?

The calculator uses the Loss Expectancy equation:

Where:

• \( AV \) — Asset Value in dollars
• \( EF \) — Exposure Factor (0-1 decimal representing percentage of loss)
• \( ARO \) — Annual Rate of Occurrence (expected occurrences per year)

Explanation: The equation calculates the expected annual loss by multiplying the value of the asset by the percentage that would be lost in an incident, then by how often such incidents occur annually.

3. Importance of LE Calculation

Details: Loss Expectancy is crucial for risk management, helping organizations prioritize security investments and insurance coverage based on potential financial impact.

4. Using the Calculator

Tips: Enter accurate asset values in dollars, exposure factor as a decimal (e.g., 0.3 for 30%), and annual occurrence rate. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is this different from Single Loss Expectancy?
A: Single Loss Expectancy (SLE) is AV × EF. LE adds the annual component (ARO) to estimate yearly expected losses.

Q2: What are typical EF values?
A: EF ranges from 0 (no loss) to 1 (total loss). Common values are 0.1-0.5 for partial losses.

Q3: How to estimate ARO?
A: ARO is based on historical data or industry benchmarks for how often a threat materializes annually.

Q4: Are there limitations to this calculation?
A: Accuracy depends on input quality. It doesn't account for correlated risks or changing threat landscapes.

Q5: How should LE be used in decision making?
A: Compare LE against mitigation costs to determine cost-effective security controls (when mitigation cost < LE).