Terrorism's Business fallout.(COMMENTARY)

Article excerpt


In the aftermath of September 11, the daily barrage of predictions of incipient terrorist attacks against numerous business targets - nuclear power and chemical plants, shopping malls and financial institutions - has accelerated the need to highlight lessons learned thus far on the impact of terrorism on business.

Terrorism is relatively easy and inexpensive to activate yet very difficult and extremely costly to counter. The costs of protecting industry from terrorist acts against it have run into the billions of dollars. These costs are ongoing and are likely to rise in the future.

Business, too, is cognizant that it has limited financial resources with which to reduce terrorist threats. In turn, the tension between providing sufficient security without expending excessive resources has gained greater resonance.

Analogously, due to rising costs associated with corporate security, industries will have no other recourse other than to shift some of these expenditures to consumers. As there is now a security surcharge on airline tickets, so too, other businesses deemed soft targets of terrorism such as restaurants and movie theaters may follow suit. Security charges were instituted at some restaurants in Israel, where numerous suicide bombers have wrecked heavy human and financial tolls.

Significant terrorist attacks may negatively impact several sectors simultaneously - perhaps commercial aviation, insurance, hospitality and tourism - during an initial period. At the same time opportunities might be created and expanded in other industries - such as corporate security, defense, biometrics, and explosive detection equipment. Product lines may be removed from the market or limited, depending on the severity of the attack (for example, terrorism insurance coverage becomes scarce).

A terrorist incident on one portion of an industry, such as commercial airlines in the transportation industry, can have positive ramifications on other segments of the same industry, such as corporate jets. A terrorist's use of one business service (e.g., postal system) can lead to opportunities in unrelated business sectors (e.g., pharmaceuticals) as demonstrated during the anthrax attacks in fall 2001.

Companies are creating subsidiaries and expanding business units focusing on homeland defense products and services. There has been an increase in joint ventures, mergers, and acquisitions among companies helpful in the war on terrorism, particularly among defense and biometrics companies. Such collaborative and integrative shifts are expected to proceed.

A multifaceted private-pubic relationship has developed as a result of the war on terrorism. …