Global terrorism: braced for financial fallout

Exposure to geopolitical risks and terrorism are growing concerns for many
organisations whether large or small. In many regions of the world, established
local security threats show little sign of abating and are often extending their
geographic reach. Fermenting these established threats are so-called emerging
perils (for example, food, migration, fuel, climate change) which threaten to
destabilise particular regions of the globe. At the same time, if businesses
choose to expand the geographical sphere of their operations, they will
increasingly bring themselves into contact with previously unencountered

While the likelihood of an enterprise’s operations being targeted or directly
affected by terrorist violence or any other geopolitical factor constitutes a
key consideration for a resilient business, it does not form the limit of that
organisation’s exposure to such events. The organisation’s external
relationships and dependencies also play a crucial role in defining these risks.

In order to be able to identify and exploit potential opportunities, as well
as ensure security and resilience, a business must understand all three
components of risk: threat, vulnerability and consequence. It is only after
these elements have been assessed that an effective and efficient method for
managing risk can be developed.

While numerous terrorist threats exist throughout the world, most of which
are capable of having an international reach, it is perhaps the emergence of
Salafi terrorism as a global phenomenon that represents the greatest threat in
terms of geographical breadth. Consequently there are few countries not exposed
to a threat from terrorism and fewer businesses immune from its effects.

Inasmuch as globalisation has allowed businesses to exploit the opportunities
of trading and investing in foreign climes, so it has also changed the threat
context in which they operate. Indeed many of the stable economies and polities
which historically generated the best profits can now show significant signs of
political instability and exploitation by terrorists ­ who also have business

Furthermore, in some cases this expansion and migration into new areas of
geographic operation has itself been a catalyst fermenting extremism and
facilitating the growth of terrorism, for example among susceptible Muslim
communities as well as political activist groups opposed to the consequences of

Non-governmental organisations operating at home and abroad have become
attractive targets for terrorism. The Arup Terrorism Database records a large
increase in the percentage of terrorist attacks that have targeted commercial
operations since the 1970s. As companies become symbols of foreign economic and
cultural hegemony and as western governments seek to protect their critical
national infrastructure and key assets ever more robustly, the private sector is
increasingly seen as the ‘easy hit’ for terrorists.

While being exposed to a greater threat from terrorism, the consequences for
businesses are becoming increasingly severe. Broadly, these can be divided into
direct and indirect impacts, with direct impacts ranging from the deaths of
employees, through the destruction of physical assets, to the loss of
information communication technologies.

The indirect effects of terrorism and geopolitical risk can be much more
difficult to quantify but the diminishing importance of national borders to
commercial markets and the resulting interdependencies between businesses, means
they can be just as devastating for an organisation. For example, the operations
of a business not directly affected by a terrorist attack may be disrupted by an
attack targeting a company one, two or even three levels removed in its supply
chain. Similarly, an incident directly affecting a major customer may lead to
disruption in the settlement of invoices, resulting in cash flow challenges.

Consequently, an organisation’s relationship with risk must be tightly
managed to ensure that exposures do not exceed tolerable levels. The first step
in the risk management process for any organisation is to understand the risk
landscape in which it operates. To determine this, businesses must also analyse
their vulnerabilities to the direct and indirect consequences of terrorism. By
combining a robust threat profile with the value (strategic and fiscal) of
assets, people and services, an assessment of terrorist risk exposure can be

Additionally, there are vast sources of research and information available
that can assist businesses in making this assessment, yet filtering the huge
quantity of available data and determining its reliability, presents numerous
challenges. Ultimately, the most reliable and efficient approach for an
organisation looking to be fully informed is to use intelligence relative to the
individual locations in which it operates, use experts ‘on the ground’ to
validate this data, and verify all of this against global data sets, such as the
Arup Terrorism Database.

The next step is to link this data to information regarding an organisation’s
operations and dependencies worldwide. This can be done analytical tools to
supplement the ‘softer’ assessments and intelligence reporting. For example,
through geographic information systems technology organisations can map their
assets, people, supply network and operations using their real world location,
which makes analysis and decision-making easier and more robust. This provides
organisations, large or small, national or international with a clearer picture
of the risk landscape, allowing them to proceed to take appropriate measures to
become more resilient and mitigate these risks.

Terrorism database

The Arup Terrorism Database (ATD) represents a response the growing need for
comprehensive, straightforward and reliable data concerning past terrorist

While detailed prediction of terrorist events is difficult, trends can be
seen in the plethora of
past incidents. Supplemented with global intelligence and in-house analysis,
these trends
can often be projected into the future, enabling more accurate assessments of
current and
future risk exposure.

The ATD currently holds incidents from 1973 onwards and is updated daily. For
each incident the ATD records information concerning the target type and sector,
the event’s consequences (casualties, physical damage, operational disruption
and immediate financial costs), the attack method and geo-referencing data.

Alongside this, each record reports the assailant group and references this
to a database of terrorist organisations that details ideology, motivation,
objectives, targeting preferences, areas of operation and key personnel. A full
description of the event is also recorded and updated as more information
becomes available. The ATD is able to exploit Arup’s worldwide presence to
ensure that local knowledge is captured and available for analysis throughout
the world. Combining the ATD with our in-house GIS tools and local expertise
allows client portfolios to be mapped into the same domain as the terrorist
incidents and to be analysed together with global metrics of geopolitical
contexts. Thus allowing for a more complete understanding of the exposure to
geopolitical risk and terrorism.

Dr Nick Pope is a principal consultant at Arup Security

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