Question

natural disasters can happen at any time and have unknown or incalculable effects. based on information from subject matter experts, the probability of a natural disaster is once every 75 years. using this information, what is the annualized rate of occurrence (aro) for a natural disaster affecting an organization?

Answer 1

0.013 is the annualized rate of occurrence (ARO) for a natural disaster affecting an organization.

Annualised Rate of Occurrence (ARO): An expected frequency of the hazard occurring over the course of a year is known as the Annualised Rate of Occurrence (ARO). ALE is computed using ARO (annualized loss expectancy).

The annualised rate is applicable for a specific amount of time (less than 12 months). It is a mathematical extrapolation of an estimated yearly returns rate. In order to determine it, multiply the monthly change in returns rate by 12 to obtain the annual rate.

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