Hedging against terrorism: Are US businesses prepared?

Area of Science:

• Business Management
• Risk Management
• National Security

Background:

• Private US companies face significant operational risks from financial matters, terrorism, and natural disasters.
• Current preparedness is often insufficient to mitigate disruptions from high-impact events like terrorist attacks.
• Adapting tactics by adversaries makes terrorism risk management particularly challenging.

Purpose of the Study:

• To incentivize business executives to develop robust preparedness and operational hedging strategies.
• To highlight the need for flexible plans addressing both natural disasters and terrorism.
• To underscore the importance of proactive risk mitigation for business continuity.

Main Methods:

• Analysis of post-9/11 US government guidance for business preparedness.
• Examination of risk-elimination programs for private insurance entities covering high-consequence terrorist strikes.
• Conceptualization of operational hedging strategies analogous to financial hedging.

Main Results:

• Flexible preparedness plans are essential for mitigating risks from large-scale natural disasters and terrorist attacks.
• Government guidance and insurance programs can support business resilience against terrorism.
• Operational hedging strategies can exploit and lower risks from future uncertainties.

Conclusions:

• Investing in planning and hedging significantly increases the likelihood of business survival and thriving post-disaster.
• Proactive risk management ensures satisfaction for suppliers, customers, and stakeholders.
• Executives must prioritize the development and implementation of comprehensive resilience strategies.