What does Annualized Loss Expectancy (ALE) measure?

Annualized Loss Expectancy (ALE) is a critical measure in risk management, specifically designed to quantify the potential financial impact of risk events over a one-year period. It is calculated by taking into account both the expected frequency of these risk events and the average loss incurred each time an event occurs.

Selecting the projected annual loss due to risk events as the correct answer reflects an understanding of how organizations evaluate and prioritize their security measures and resources. By determining the ALE, businesses can allocate budgets effectively, implement risk mitigation strategies, and make informed decisions about which risks to accept, transfer, or eliminate entirely.

The other options focus on different aspects of risk management that do not specifically encapsulate the concept of ALE. For instance, the total value of assets at risk gives a broad view of potential exposure but does not factor in the likelihood and specific financial impact of incidents, which is essential for calculating ALE. The frequency of risk events is valuable information but does not convey the financial implications and thus is not sufficient for understanding the overall loss expectancy. The percentage of asset loss over time relates more to the depreciation or impairment of assets rather than the forecasted financial loss from potential risk events.