Terror, Security, and Money: Assessing the Cost-Effectiveness of Critical Infrastructure Protection

Abstract eng:
The use of decision theory to determine acceptability of risk is crucial to prioritise protective measures for built infrastructure. Scientific rigour is needed when assessing the effectiveness and the need for protective measures to ensure that their benefits exceed the cost. The paper will assess terrorist threats to critical infrastructure and the cost-effectiveness of protective and counter-terrorism measures. This analysis will consider threat likelihood, cost of security measures, risk reduction and expected losses to compare the costs and benefits of security measures to decide which security measures are cost-effective. In this paper, we focus on bridges and apply break-even cost-benefit analysis to determine the minimum probability of a successful attack, absent the security measures, that is required for the benefit of the security measures to equal their cost. Table 1 arrays the annual attack probabilities (p_attack-min) required at a minimum for security expenditures on protecting a bridge to be cost-effective. This break-even analysis shows that protective measures that cost $500,000 per year and that successfully protect against an attack that would otherwise inflict $250 million in damage would be cost-effective only if the probability of a successful terrorist attack without them exceeds 0.21 percent or one in 480 per bridge per year. If we assume risk is reduced only by 50 percent, the minimum attack probability per year required for bridge protective measures to be considered cost-effective increases to 0.4 percent per bridge. It was found that unless terrorist threat probabilities are high, then typical protective measures are not cost-effective. For additional and wider-ranging assessments of the issues raised and the approaches used, see John Mueller and Mark G. Stewart, Terror, Security, and Money: Balancing the Risks, Benefits, and Costs of Homeland Security, Oxford University Press, 2011.

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