Navigating the Rise in Terrorism Threats

Terrorism is a multifaceted issue that requires comprehensive strategies to address effectively. 

American Flag on 9/11 Memorial

The events of Sept. 11, 2001, shattered our sense of security and left an indelible mark on our history. Even now, 23 years later, many of us can vividly recall where we were and what we were doing when we heard the devastating news.

Today, the threat of terrorism on U.S. soil remains a stark reality. FBI Director Christopher Wray has expressed growing concerns about the potential for a coordinated terror attack, particularly as conflicts like the Israel-Hamas dispute continue to escalate. 

The safety and well-being of our loved ones and fellow citizens are paramount. However, for businesses—whether large corporations or small enterprises—the impact of a terrorist attack can also be devastating, both directly and indirectly. Employees depend on these businesses for their livelihoods, making preparedness essential for maintaining stability and resilience.

In this article, we will delve into the prominent threat posed by terrorism, explore its ripple effects on the economy and various aspects of business operations and finances and provide insights for risk managers to bolster their protection strategies.

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The U.S. is facing an increasing threat from terrorism, and it's crucial that we understand the severity of this issue. Recent reports, such as the 2024 National Terrorism Financing Risk Assessment (NTFRA), highlight the growing risks. It concludes that the international security landscape has become more complex, with countries such as Russia and China seeking to challenge the U.S.-led global order. 

The increased numbers of "gotaways" at the border could potentially pose a security threat. In December, the chairman of the House Committee on Homeland Security, Republican Mark Green, said the number of individuals apprehended illegally crossing the Southwest border and found to be on the terrorist watch list has increased 2,500% from fiscal years 2017-2020 to fiscal year 2023. The Democrats for Border Security task force was developed earlier this year to emphasize enforcement. 

Global challenges, such as humanitarian crises and health concerns, further complicate the terrorism landscape, which is why 2024 Homeland Threat Assessment deemed them “a top threat to the homeland.” Terrorism is a multifaceted issue that requires comprehensive strategies to address effectively. 

Terrorism’s Impact on the U.S. Economy and Businesses

Let’s go back to the topic of 9/11. The attacks were a human tragedy, but they also had economic implications that reverberated throughout the U.S. business landscape. The immediate aftermath saw stock markets plunge and economic sectors strained. Insurance companies initially hesitated to cover damages from terrorist acts, introducing uncertainty and escalating financial risks for businesses.

Small businesses, particularly those near the World Trade Center, suffered major losses, with nearly 18,000 shut down or destroyed, according to Investopedia’s The Impact of 9/11 on Businesses. The devastation caused the Consumer Confidence Index to plummet. 

See also: CBRN Terrorism Insurance: A Risk Too Far?

Specific Ways Terrorism Affects Businesses

  • Economic Disruption: Terrorist attacks can disrupt the normal functioning of businesses by damaging infrastructure, disrupting supply chains and causing closures. This disruption can lead to financial losses due to reduced productivity and increased costs for security and recovery.
  • Investment Climate: Terrorism creates an unstable investment climate, making businesses less willing to invest in new projects or expand operations. Foreign investors may also be hesitant to invest in countries perceived as high-risk due to terrorism.
  • Increased Security Costs: In response to the threat of terrorism, businesses may need to increase spending on security measures, such as surveillance systems, security personnel and cybersecurity. These additional costs can strain a company's finances.
  • Insurance Costs: Following terrorist attacks, insurance premiums for businesses may rise, reflecting the increased risk associated with operating in areas prone to terrorism.
  • Reputation and Brand Image: Businesses located in areas affected by terrorism may suffer damage to their reputation and brand image, which can affect consumer perception and loyalty. This can have long-term consequences for a company's profitability and market share.
  • Regulatory Changes: Governments may introduce regulations and compliance requirements in response to terrorist threats, increasing operational costs and administrative burdens for businesses.
  • Supply Chain Vulnerability: Terrorism can disrupt global supply chains, particularly for businesses that rely on international suppliers or operate in regions prone to terrorist activity. This can lead to delays, increased costs and supply shortages.

Measures to Safeguard Business Operations Amid Terrorism Threats

In response to the persistent challenges posed by terrorism, risk managers must advise their clients on fortifying operations and mitigating potential risks through robust strategies and contingency plans. Other tactics worth considering include:

Terrorism Insurance

Investing in terrorism insurance is a prudent move for businesses seeking to shield themselves from the financial fallout of terrorist attacks. This specialized insurance covers losses from property damage, business interruption and liability claims, providing a crucial safety net against both direct and indirect costs.

Consider Terrorism During Risk Assessments

Incorporating terrorism into your risk assessments enables businesses to identify and evaluate potential vulnerabilities. Risk managers can then develop targeted strategies to bolster security measures, enhance preparedness and reduce exposure.

Security Measures

Investing in robust security measures, such as physical security enhancements, surveillance systems, access controls and cybersecurity protocols, can deter terrorist attacks and minimize the impact of security breaches. Collaboration with law enforcement agencies and security experts can provide valuable insights and support in implementing effective security measures tailored to specific business needs.

Supply Chain Diversification

Diversifying supply chains by sourcing from multiple suppliers and geographic locations can help businesses reduce dependence on vulnerable regions and minimize the impact of supply chain disruptions caused by terrorism. This strategic approach ensures continuity of operations.

Legal and Regulatory Compliance

Staying informed about relevant laws, regulations and compliance requirements can help businesses ensure adherence to legal obligations and mitigate potential legal risks. Consulting with legal experts and compliance professionals can provide guidance on navigating regulatory complexities.

Captive Insurance

Captive insurance offers an alternative risk management strategy. By establishing an insurance subsidiary to underwrite the risks of the parent company and its affiliates, businesses can tailor insurance policies to meet their specific needs and risk profiles, including coverage for terrorism-related risks. Careful planning, regulatory compliance and continuing management are, however, essential.

By embracing these strategies and collaborating closely with insurance providers, security experts and other relevant stakeholders, risk managers can enhance their clients’ or business’s resilience to terrorism-related risks and safeguard their operations, assets and reputation. Managing terrorism-related risks is crucial for navigating the complex and evolving landscape, ensuring business continuity and safeguarding long-term success.

Randy Sadler

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Randy Sadler

Randy Sadler is a  principal with CIC Services, which manages more than 100 captives.

He started his career in risk management as an officer in the U.S. Army, where he was responsible for the training and safety of hundreds of soldiers and over 150 wheeled and tracked vehicles. He graduated from the U.S. Military Academy at West Point with a B.S. degree in international and strategic history, with a focus on U.S.–China relations in the 20th century. 

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