A method for allocating financial resources to combat terrorism: Optimizing the reduction of consequences

The National Strategy for Homeland Security established three strategic objectives: (1) Prevent terrorist attacks within the USA, (2) Reduce America's vulnerability to terrorism, and (3) Minimize the damage and recover from attacks that do occur. Objectives 1 and 3 essentially reprogram and reprioritize activities within existing agencies such as the FBI, Customs, the Coast Guard and FEMA, while objective 2 presents an entirely new examination of the Nation's infrastructure. Since the USA cannot counter all possible threats, the Department of Homeland Security is actively developing a risk-based management framework to prioritize vulnerabilities and to fund activities that most effectively reduce the nation's vulnerability to terrorist attack. This paper presents a mathematical framework for resource allocation to decrease America's vulnerability to terrorist attack. The authors introduce mathematical expressions that allow decision makers to allocate resources in a manner that maximizes the reduction in vulnerability to terrorist attack, subject to budget constraints. They introduce a delayed return function that captures the effect of long-term investments in risk- mitigation activities (such as R&D) that may not have a short- term pay-off, but whose long-term contribution is substantial. The method is demonstrated using illustrative scenarios and a linear programming approach.