What is single-loss expectancy?
Single-loss expectancy (SLE) refers to the expected monetary loss each time an asset is at risk. It’s a term that’s most commonly used during risk assessment and attempts to put a monetary value on each single threat.
Where have you heard about single-loss expectancy?
You may have heard single-loss expectancy mentioned in conjunction with annualised loss expectancy (ALE), as it is required for this calculation.
If you’ve looked into a business’ financial records you may have come across these terms, especially where assets are at risk from a specific threat.
What you need to know about single-loss expectancy.
The equation for single-loss expectancy is:
SLE = AV * EF
Asset value (AV) is the value per share as determined on a specific date or time. Exposure factor (EF) is measured as a percentage and calculates the potential loss that could occur to an asset if a specific threat is realised.
For example, if an asset is valued at £100,000 and the exposure factor for the asset is 25%, the single-loss expectancy equals £25,000 (£100,000/25% = £25,000).
As an investor you should be looking for companies with a low single-loss expectancy in order to limit your risk.
Find out more about single-loss expectancy.
Learn more about how you can limit your risk exposure in order to maximise profits and reduce the risk of loss.