How Does Terrorism Affect Manufacturing?

Unfortunately, terrorist attacks are a real and present risk for businesses of all types. And tremors are being felt throughout the domestic manufacturing sector. This article examines some of the main repercussions for manufacturers on the global stage and in their own plants and warehouses.

View of the Global Economy

Here are four significant ways that terrorism can affect the global economy:

1. Market uncertainty. You don't have to be anywhere near a terrorist attack to experience a financial downturn. Cataclysmic events and uncertainty caused by terrorism are known to roil the world's economic markets. One dramatic example is the immediate and sustained decline following 9/11.

However, as such events become increasingly frequent, they seem to have less of a long-term impact. In the face of recent attacks, the stock markets both abroad and in the United States have shown some resiliency. Nevertheless, when there's a perception that there's no longer a safe place to do business, terrorist events affect the broader picture and will likely have a cumulative effect.

2. Destruction of property. While other effects of terrorism are difficult to measure, physical destruction can often be quantified. Manufacturing plants, transportation systems and physical property are destroyed at an enormous cost. The infrastructure in the surrounding area will be strained as businesses struggle to cope with the aftermath.

Notably, resources that normally would be focused on producing goods and services are diverted and allocated for other purposes, such as spending on the military and improving security. Overall, the impact is almost certainly negative, although some observers suggest that military spending leads to an economic boost.

3. Governmental reactions. A bunker mentality among governments and citizens usually sets in after a particularly destructive attack or series of attacks. This could create a domino effect of expanded budget deficits, additional taxes and increasing inflation. In extreme circumstances, government controls may have to be initiated and nationalization of industries may even have to be implemented.

Loss of personal freedoms is often a byproduct. In addition, during militarization the private economy may suffer and recovery can take a long time.

4. International divisiveness. Typically, terrorist attacks both here and abroad encourage increased nationalism and skepticism about foreign involvement. At the same time, they tend to discourage tourism and trade in ways that hinder the global economy. This trend toward a populist movement is exemplified by political events, such as Britain's plans to leave the European Union, and erodes some of the positive results of foreign cooperation that have been built up the last few decades.

View of the U.S. Manufacturing Sector

Manufacturing is critical to the U.S. economy and the economies of many other nations. Accordingly, the manufacturing supply chain could be damaged by terrorist attacks taking place in far-away locations. The supply chain encompasses vendors supplying raw materials, warehouses and distribution centers, and retailers who deliver the goods to consumers. Without an uninterrupted flow, the entire system could crumble. The chain is only as strong as its weakest link.

If manufacturing firms in the United States aren't yet attuned to the dangers being posed by terrorist acts around the world, they need to wake up to the new reality, and fast. The following steps can help minimize your exposure to these risks:

Adopt access security. Targets of terrorist attacks are often located in high-profile areas with a heavy concentration of people. The perpetrators usually want to make a dramatic statement and inflict the most damage possible. Transportation systems aren't the only targets. Others might include office buildings, factories and corporate headquarters. Manufacturing warehouses and plants also can't be ruled out. For these reasons, your firm must adopt security measures for accessing the premises, even if it doesn't produce goods historically tied to political or governmental functions.

Find alternate delivery sources. Direct threats to a designated property aren't the only concern. If an airport is threatened and delays ensue, deliveries may be delayed. The same possibilities arise for shipments by rail or sea. With delays lasting weeks, the interruptions can irreparably harm the business, especially if property is damaged.

Develop contingency plans. Because this situation is akin to the developments following a natural disaster, such as a hurricane or flood, similar preparations should be made. If the firm isn't located in a region prone to such natural disasters, or exposure is limited, it may not have adequate emergency and contingency plans in place. The threat of terrorist acts should change this thinking.

‍Conduct a risk analysis. If your firm hasn't done so already, consult with security experts to perform a risk assessment for terrorism, especially if your firm is in a densely populated area. Include provisions for finding secondary and tertiary suppliers, emergency procedures for factory production and other methods for thwarting disruptions to the supply chain (for example, backup storage sites for data and physical assets like inventory). Make sure that workers are properly trained in emergency procedures should an attack take place.

Keep in mind, you will need to be prepared to act swiftly and decisively. The sooner you move, the less your workflow will be affected. For instance, if you rely on deliveries to a nearby airport, rail hub or port, continue to monitor activities. Be among the first to move cargo through alternative means — not the last.

Be Proactive, Not Reactive

To gain more attention to their activities, terrorists often target transportation systems, physical property and infrastructure. As a result, terrorist acts affect exports and imports with a direct connection to the manufacturing sector. You can't run and hide from the potential problems or ignore them either. Coordinate your security measures accordingly.