Terrorist attacks on a physical site can be detrimental in terms of lives and monetary loss. A major component of preparing for such an attack is deciding how to allocate funds; insufficient budgeting may expose the site to worst-case consequences, whereas over-budgeting may create inefficiency. Thus deciding how many funds to allocate for attack preparation should incorporate information regarding the anticipated severity of the terrorist attack. This paper discusses a methodology based on Risk Analysis and Risk Management that aids decision makers in understanding the trade-off between pecuniary loss and human loss, and applies the process specifically to a case study involving the New York Stock Exchange. Integrating this methodology with intelligence data yields information potentially useful in determining a pareto-efficient budget that achieves a balance between minimizing human and monetary loss. The end product is a trade-off analysis that identifies specific strategies for mitigating the consequences of a given terrorist attack. The design incorporates Hierarchical Holographic Modeling to identify, from multiple perspectives, important and relevant sources of risk in a system. The Risk Filtering and Ranking Method then narrows the focus to one target and one method of attack: a biological attack. To evaluate the methodology quantitatively, probability distributions were used to represent a severity of attack estimated from intelligence data. Similar in concept to the terrorism threat advisory scale used by the Department of Homeland Security, this severity index reflects the potential seriousness of a terrorist attack. Monte Carlo simulation, comparing commonly used distributions, was used to determine which distribution and parameters to employ. Lastly, Multi-Objective Decision Tree Analysis was used to incorporate the severity probability distribution, feasible policy options, and cost/casualty parameters, and identifies the options that are not dominated in both metrics. The output is a graph of dollars versus lives lost which allows the decision maker to better visualize the trade-offs between competing objectives. This paper will be of interest to persons who wish to learn about the application of risk assessment and management in the context of defense against terrorism.
