Single-Loss Expectancy multiplied by the Annualized Probability of Occurrence yields which metric?

• A. Expected per-event loss
• B. Expected annual loss
• C. Expected life-cycle loss
• D. Expected per-event benefit

Answer: (B)

The key idea is turning a single incident’s financial impact into an expected yearly loss by accounting for how often the incident occurs. Single-Loss Expectancy is the loss that results from one incident. Annualized Rate of Occurrence represents how many such incidents are expected in a year (the frequency). When you multiply these together, you get the Expected Annual Loss, which is the average amount of money you would expect to lose each year due to that risk. This is expressed as currency per year.

So the product of SLE and ARO yields the annualized loss figure used in risk assessment. It’s not just the loss from one event (that would be SLE alone), and it isn’t a total life-cycle loss or a per-event benefit, which is why the correct metric is the expected annual loss.