A General Introduction to the Business of Terrorism · Terrorism is a dynamic and complex area from a business perspective. It has been viewed as a blight on economic activity yet

A General Introduction to the Business of Terrorism

Dr Ian JacksonEnterprise Reader

Staffordshire University, UK

Tuesday, 9 May 2017Europa-Universitat Flensburg 1

The notion of Terrorism has become a hugely topical subject area in a whole array of academic disciplines ranging from PoliticalScience to Behavioural Psychology.The purpose of this general introduction is to assess the Business aspects of terrorism with particular reference to Risk and Uncertainty.


Introduction

The broad definition of Terrorism coalesces around the threat of violence and the use of violence; specifically for political aims. There is often an asymmetric element to terrorism.This definition must be contrasted with the notion of Organised Crime which uses similar methods, but motivated only for private gain.


What defines Terrorism?

It has been noted that Terrorism is a fourth Generation of Warfare

* Post-Conventional* Post-Nuclear* Post-Guerrilla* Terrorism is spatial conflict involving non-

combatants often via the media

What denotes Terrorism?


* Use of force on civilian targets* Unofficial capacity; not part of any national army* Main aim to attain political goals* Intended effects beyond immediate victims

From “Dealing with Terrorism” (Frey 2005)

Characteristics of Terrorism


The antecedents of Terrorisms are actually long-standing and developed in Ancient times. The Reign of Terror (1793-1794) following the French Revolution exemplifies state Terrorism.The British Mandate (1920-1948) in Palestine witnessed early forms of Terrorism such as the bombing of the King David Hotel in 1946.


A Brief History of Terrorism

The mid to late Twentieth Century witnessed a significant rise is Terrorism, which has been dated to after the Six Day War in 1967.Since then all forms of Terrorist activity has been linked to national groups such as ETA, IRA, PLO and ISIS such as kidnapping, car bombing, aircraft hi-jacking and gun-running.


Modern Terrorism

* Transnational Terrorism* Climate Change* Financial Instability* Cyber Crime * Artificial Intelligence* Nanotechnology Weapons* Others? * Can these threats be ranked?

Ranking Threats to Global Stability



Managing Extreme Risks

The rise in Terrorism since the beginning of the 21st Century has been significant.Between 2000 and 2014, there have been 61,000 incidents of Terrorism and 140,000 deaths representing a nine-fold increase; (excluding recent events in 2015) according to Institute for Economics and Peace.


The Rise in Terrorism since 2000


Global Terrorism Index

* Terrorism diverts investment activity* Reduction in foreign direct investment* Decline in Stock Markets* Increased perception of fear

Psychic costs* Decrease in Tourism activities* Opportunity Costs of Travel

Consequences for the Economy


The Shadow of 9-11


Short Term Costs * National Commission on Terrorist Attacks upon

the USA 9/11 cost $0.5 billion ** Overall effect on US Economy marginal

Long Term Costs* Cumulative budget costs of wars in Afghanistan

and Iraq $500 billion ** * Belasco (2006) report 331100 Library of Congress** Stiglitz (2006) real cost of war in Iraq $ 1 -2 trillion

The Business Effects of 9-11


* 2005: Official Congressional Budget OfficeCost of Iraq war so far $500 billion

* 2006 Stiglitz and Bilmer $1 – 2 trillion with other medical costs to take into account

* By 2017 $1 trillion will have been spent in interest payments to finance the war.

The Three Trillion Dollar WarStiglitz and Bilmer Penguin Books (2008)


Risk and Uncertainty permeate the academic analysis of Terrorism. The Cold War is a classic case of risk involving the doctrine of Mutually Assured Destruction.Post-Cold War is a classic case of uncertainty or unknown unknowns such as 9-11 which is a near perfect example of a “Black Swan” event.


Risk and Uncertainty Revisited

Expected Return

(US$)

Risk (Beta)

In a more uncertain world there is a need to accept lower return for risk

CAPITAL PRICING MODELS (CAPM)

0

Risk Free


* Ability to react over a long period of time using business forms of organisation;

* Switch to targets which are less costly to attack and more vulnerable;

* Engage activity in countries where chances of success are highest;

* Engage in cycles of activity as resources become depleted over time.

Are Terrorists Rational?


* Stick: is re-actively dealing with Terrorist activity after it has taken place usually with the use of force

* Carrot: is proactively dealing with actual and potential terrorists giving positive incentives to desist activity

Incentives and Deterrence



The Data Set

* Increased surveillance* Reduced human and political rights* Due process of law restricted * Over-sight by Parliament is reduced * Guilt by association increases* Effectiveness of the measures is ill-defined

Law of Unintended Consequences


* Violent extremists are often decentralized, dispersed and appeal to local populations.

* So, create a credible local response is key to the solution.

* Suppressing violent extremism is inherently a political as well as a military struggle.

* A contest for hearts and minds is the purpose of a population–centric approach.

Future Strategy


Terrorism is a dynamic and complex area from a business perspective. It has been viewed as a blight on economic activity yet 13 homicides occur for every 1 death by Terrorism.Terrorism is like the many-headed serpent known as the hydra from Greek mythology; but the concept must neither be totally ignored nor indeed be taken out of proportion.


Conclusions and Summary

Documents

A General Introduction to the Business of Terrorism · Terrorism is a dynamic and complex area from a business perspective. It has been viewed as a blight on economic activity yet