What is the expected monetary loss referred to as when a risk occurs, calculated by multiplying asset value by exposure factor?

The concept of expected monetary loss when a risk occurs is known as Single Loss Expectancy (SLE). SLE is calculated using the formula:

SLE = Asset Value x Exposure Factor

This means that when a risk event occurs, the financial impact on an organization's assets can be estimated by evaluating the total value of those assets and the probability that a certain percentage of that value will be lost due to the risk. Essentially, SLE provides a clear, quantifiable metric for understanding the potential upset to an organization’s financial position associated with specific risks, making it crucial for effective risk management and decision-making processes.

The other terms do not accurately define this calculation. The Expected Value (EV) generally refers to the average outcome of a random variable, not specifically tied to assessed financial risk like SLE. Risk Factor (RF) is a broader term that can relate to components of risk evaluation, but it does not provide the monetary context that SLE offers. Aggregate Loss Expectation (ALE) is typically used to describe the total expected loss due to risks over a set time frame (therefore cumulatively rather than on a per-instance basis). Thus, Single Loss Expectancy effectively captures the specific financial impact of a singular risk event.