Which metric assesses the potential financial loss due to a security breach over a year?

The metric that assesses the potential financial loss due to a security breach over a year is referred to as Annualized Loss Expectancy (ALE). This concept is critical in risk management as it provides a quantifiable measure of the expected annual monetary loss that could be incurred from a specific type of risk when considering frequency and impact.

ALE is calculated by using two key components: the Single Loss Expectancy (SLE) and the annual rate of occurrence (ARO). The SLE represents the monetary value of the potential loss from a single incident, while the ARO indicates how often that loss event is expected to occur in one year. By multiplying these two figures together, organizations can determine the ALE, which helps in budgeting for potential losses and prioritizing security investments.

In risk management, applying ALE allows organizations to make informed decisions about implementing controls, understanding security postures, and justifying necessary expenditures to mitigate risks, thereby enhancing overall security effectiveness.