Which of the following terms related to risk management represents the estimated frequency at which a threat is expected to occur?

Question

Options

• ASafeguard
• BAnnualized Rate of Occurrence (ARO)
• CSingle Loss Expectancy (SLE)
• DExposure Factor (EF)

• A
  3% (1)
• B
  88% (29)
• C
  3% (1)
• D
  6% (2)

Explanation

Annualized Rate of Occurrence (ARO) is the metric that quantifies how many times per year a specific threat is expected to occur - for example, an ARO of 0.5 means the threat is expected once every two years. A Safeguard (A) is a countermeasure used to reduce risk, not a measurement of frequency. Single Loss Expectancy (SLE) (C) represents the monetary loss from a single incident (Asset Value × Exposure Factor), while Exposure Factor (EF) (D) is the percentage of an asset's value lost in a single incident - both deal with dollar impact, not frequency. ARO is used alongside SLE to calculate Annualized Loss Expectancy (ALE = SLE × ARO), which is the key formula to remember: ARO is the rate (how often), SLE is the cost (how much per event), and ALE is the total yearly expected loss.

Memory tip: Think of ARO as your "annual odds" - just like a weather forecast gives you the probability of rain per year, ARO gives you the expected number of threat occurrences per year.

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