A ransomware event has a 20% annual chance and an expected loss of $500,000 per incident. Using ALE = SLE × ARO, what is the estimated annualized loss?

### Why this is right The annual chance of 20% is expressed as 0.2, and the expected loss for one event is $500,000. Multiplying the two gives an estimated annual loss of $100,000. ### The concept Annualized Loss Expectancy estimates average loss per year by combining a loss per occurrence with an annual occurrence rate. It is an estimate for decision-making, not a promise that the organization will lose exactly that amount each year. The method is useful for comparing the expected risk with proposed control costs. ### The other options - **$500,000 per year**: this uses the single-incident loss without adjusting for the 20% annual chance. - **$2,500,000 per year**: this results from dividing by 0.2 instead of multiplying by the annual rate. - **$20,000 per year**: this incorrectly treats 20% as 0.04 of the expected loss. ### Worked numbers - **Given**: annual chance $0.2$, loss per incident $\$500{,}000$. - **Find**: estimated annual loss in dollars per year. - **Formula**: $ALE = SLE \times ARO$, where $SLE$ is loss per event and $ARO$ is annual occurrence rate. - **Solve**: $ALE = \$500{,}000 \times 0.2 = \$100{,}000$ per year. - **Answer**: $\$100{,}000$ per year. - **Check**: a 20% annual chance gives an estimate below the full single-event loss. ### Terms - **Ransomware**: malicious software used to disrupt access to data or systems, often to demand payment. - **ALE**: Annualized Loss Expectancy. - **SLE**: Single Loss Expectancy. - **ARO**: Annual Rate of Occurrence. ### Remember For annualized loss, multiply the loss from one event by its annual frequency.