Question

What is the difference between ALE and MPAL? Explain how each is calculated. (This is for a Security Risk Analysis class.)

Answer 1

Annual loss expectancy (ALE) is the term used to compute potential loss in terms of a quantitative assessment of potential loss and rate per year. It is calculated as multiplication of SLE and ARO where SLE is single loss expectancy and ARO is annualized rate of occurence.

formula for risk is vulnerability multiplied with threat and so corresponding factors will be as SLE is calculated as asset value times the threat exposure factor and ARO is the estimated chances of a specific risk exposure occuring ina one year time period.

Coming to its counterpart, MPAL is denoted as maximum probable annual loss similar to VaR or value at risk when pure risk exposure is considered, it is the lowest percentile on the list of probabilities explaining risk exposure. VaR is the maximum loss upto a fixed probability limit associated with a security or a set of portfolio given the set of risks associated with it .