The Effects of Terrorism on Business

It’s simply hard to believe that 9/11 happened 13 years ago today.  People even often forget that when they look at the calendar and see “September 11^th,” that over a decade ago the U.S. faced the greatest attack on our nation since Pearl Harbor.  With ISIS emerging and seeming to be even more dangerous than Al Qaeda, which many thought would never be possible, it’s not just that terror threats impact people and their emotions such as, fear at what the future holds and deep sadness on what has transpired in the past, but there is also a very real threat to business that comes along with terrorism.

On that fated and tragic day of 9/11, countless multinational corporations were shut down and had to update their strategic planning as a result.  And over a decade later companies are still grappling with how best to manage terrorists’ threats.

In the 20 years prior to 2011, firms were launching international ventures at an exceedingly rapid pace but after 9/11, direct investments by foreign nations fell dramatically as firms withdrew to their home markets fearing multinational business ventures.  There was a vast decrease in the attractiveness of the “international company” and, as a result, global brand names decreased considerably as business managers began to place more emphasis on domestic and local affiliations and business partnerships.

Terrorism has even had an effect on international business education in the U.S. which has become visible by substantially decreased enrollment in foreign languages and international business courses.  Over the past decade, business managers have shifted a large portion of exploring international opportunities to a vastly more defensive stance which now emphasizes threats from abroad and vulnerable foreign operations.

Beyond the implications of terrorists’ threats to United States businesses, even in other regions, most noticeably Europe, the radicalization of individuals and groups, motivated by some form of twisted ideology or religion, has threatened local cooperation as well.  While European business schools have actually benefited from tighter restrictions on international student enrollment in the U.S., the focus as in this country has shifted from global to regional trade regardless.

Terrorism also has led to the rise of public-private partnerships, in which governments and businesses work together to counter it.  For example, global police and federal agencies now partner consistently with private firms to combat cyber-crime and attacks on critical computer and technological infrastructure.  This shift can be somewhat surprisingly seen in the fact that even governments use social media to organize campaigns to fight terrorists’ threats even as social media often works against citizen safety and government interests.

That said, as the capacity to protect key facilities has vastly improved since 9/11, that focus on high-value assets has actually encouraged terrorists to redirect their violence on what one might refer to as “soft targets” such as businesses that aren’t as well protected.  So it’s not an uncommon result that greater security at home leads to an increase by terrorist groups to take aim at foreign operations which is a strong argument for local business to steer clear of international enterprise.

It’s not surprising then that companies have placed a greater emphasis on the consideration of terrorism risk when choosing how and even if to enter foreign markets.  For many years before 9/11, foreign direct investment was seen as a vastly preferred approach.  Now instead of importing, U.S. companies favor exporting as a result of terror threats.

Skillful management of global logistics and supply chains cuts the risk and cost of downtime. Firms seek closer relations with suppliers and clients in order to develop more trust and commitment.  Some have increased “on-shoring” by bringing suppliers back into the country when their remoteness constitutes risk.

It’s no surprise then that terrorism poses significant threats to the ultimate performance of business when they fear going multinational.  While terrorism causes organizational crises, even though the ultimate effects may remain unknown, corporate preparedness for the unexpected is crucial.  It’s critical that business owners develop back-up resources and a quick corporate response and game plan to terrorist threats not just to ensure the safety of their companies but of their employees as well.

Terrorism is a no doubt a public threat, and some managers believe government should bear the cost of protecting against it.  Others argue that a public-private partnership is the most effective approach, with firms taking the lead.  There is also the issue whether corporate headquarters or the locally exposed subsidiary should fund prevention and preparation expenditures.  Regardless of who pays, everyone can agree on the need to guard against terrorism.

While as citizens of the United States, our focus no doubt remains on terrorist threats at home, even world region and international business are unsurprisingly vulnerable to terrorist threats.  Terrorism requires vigilance, thoughtful and diligent decision-making and strategy development by business owners to ward off threats.  Business owners, who are alert and aware of the necessity of preparedness against terrorist threats, run the risk of weaker performance or even the loss of their firms.  As a result of this cognizance, over a decade post-9/11 businesses are more aware, less exposed and less vulnerable to the risks of terrorism given the increase by owners to take preventative measures against the danger and harm radical groups cause on their bottom line.

While it might seem trite or callous to talk about the implication terrorism has on the business community on such a hallowed day, it’s simply the truth and the aim of this blog each week is to discuss how all things, big and small, affect business.  By discussing this today, I by no means am diminishing the reverence this day brings but yes, while terrorism stirs up many personal emotions, it still undoubtedly, has an effect on things that might seem trivial in the wake of such tragedy.  But right or wrong, it’s simply the undeniable truth: terrorism does, indeed, have an effect on the domestic and international business world as a whole and most noticeably on the way business have changed their approach to growth, expansion and success in the wake of terrorist threats.

Until next time…