ARO (Annual incidence rate) is the average number of times a particular risk is likely to materialize in a year.
Annual incidence, also known as ARO, refers to the expected frequency at which a risk or threat is expected. ARO is also commonly referred to as probabilistic determination.
The probability that a risk will materialize in a given year. For example, if insurance data indicates that a major fire is likely to occur once every 25 years, the annual frequency is 1/25 = 0.04.
Annual Expected Loss is a calculation that helps determine the expected monetary loss of his assets in one year due to a particular risk. You can calculate ALE as part of your company's quantitative cost-benefit analysis for an investment or project idea.
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