Effect of Terrorism on Risk Taking and Investment Decision

Category
Words
3511 (8 pages)
Downloads
34
Download for Free
Important: This sample is for inspiration and reference only

Table of contents

Abstract:

This article focuses on fear of terrorism as one important factors effecting risk taking and investment decision in today’s economy. We argue that external security threats can undermine incumbent target governments by exposing foreign policy failures and damaging society’s general well-being. Identifying who is at risk, how they are at risk in terms of which cognitive processes are affected, and the degree to which they are at risk.

Introduction:

Terrorism is a hazard to human life and material prosperity that should be addressed in a sensible manner whereby the benefits of actions to contain it outweigh the costs. The relationship between fear of terrorism and risk taking has long puzzled researchers. Research at the individual level has found little empirical evidence to support the idea that entrepreneurs take considerable risks (Entrepreneurial Orientation, Risk Taking, and Performance in Family Firms by Lucia Naldi, Mattias Nordqvist, Karin Sjöberg, Johan Wiklund). Over the past decade, the changing political landscape has dictated that public, private, and governmental organizations not only understand terrorism risk, but also develop a proactive plan to assess and/or manage this risk. With the increased threat of terrorism, both in the United States and abroad, public, private, and governmental agencies face an increased need to understand and manage the risk to their employees and organizational assets due to the terrorism risk.

This paper critically analyses the importance of risk management techniques in the war on terror. From the protection of borders to international financial flows, from airport security to daily financial transactions, risk assessment is emerging as the most important way in which terrorist danger is made measurable and manageable. However, we argue that the risk-based approach results in the displacement of risk onto marginal groups, while its effectiveness in the war on terror remains questionable. Risk is an important component of every investment, thus it is necessary to analyse it as both, the objective component of the investment, and as the subjective factor of the investment decision making. In the war on terrorism, it is important to understand how power is exercised through a complex policy constellation including regulatory state bodies, international institutions, industry self-regulating bodies and private risk assessment firms. This does not simply entail a shift from public to private authority, but entails more precisely the enduring and even enhanced power of particular state agencies, in close cooperation with international institutions and private risk assessment firms (Governance, risk and dataveillance in the war on terror, author Louise AmooreMarieke De Goede).

This paper provides evidence for a particular channel terrorism growth in countries. Using micro-level data surveys during the period in Islamic university Islamabad, in our research terrorism has significant negative effect on the level of investment in long-term but effects are small and insignificant for short-term investment. The presenceof a major terrorist incident in a district in a year reduces long-term fixedinvestment by around 17% after controlling for district.

Following the Terrorist

Attacks on the World Trade Centre and the Pentagon in2001, polls in the United States revealed a heightened level of fear and anxiety about the likelihood of further terrorist attacks. According to one poll, 52 percent of Americans said they could imagine themselves or a loved one as a victim of a terrorist attack (Kakutani, 2001). Despite the fact that risk assessment studies in Australia underline that the actual risk of a terrorist attack is marginal in comparison to many other mortality risks such as smoking and car accidents(Mueller,2004;Viscusi, 2003), Australian polls also indicated heightened levels of fear and anxiety about a possible terrorist attack in Australia. According to a poll published in the Sydney Morning Herald in April 2004, 68 percent of Australians believed that Australia was at threat of an imminent terrorist attack (Michelson, 2005; Viscusi, 2003). A national project at Edith Cowan University funded by an Australian Research Council Discovery Grant (Safeguarding Australia) examines the nature of the fear of terrorism operating within the Australian community since the September 11 terrorist attacks. The projects incorporate qualitative research study on audience constructions of the media and popular discourse on terrorism. The findings of this study were used to inform the development of an innovative quantitative metric of fear designed to measure how Australians are responding to the fear of terrorism. Research into the effects of fear on social behavior has traditionally focused on two patterns of behavioral responses to fear: restrictive behaviors which assume that people constrain their behavior to avoid circumstances considered unsafe, and assertive behaviors which involves people adopting protective behaviors in circumstances considered to be unsafe (Liska, 1988). An analysis of empirical evidence collected was conducted in the first stage of the project to develop a construct typology of fear (Becker, 1940). The results pointed to the fear of terrorism as affecting both restrictive and protective behaviors. As the first of its kind, the metric of fear measures the extent to which Australians are constraining their behaviors and adopting protective behaviors in response to the fear of terrorism.

The Fear of Terrorism

There is no internationally accepted, unitary definition of terrorism. A brief review of the literature on terrorism reveals over 100definitions. InAustralia, terrorism is defined by the Australian Defense Force as the “use or threatened use of violence for political ends or for the purpose of putting the public or any section of the public in fear” (Martyn, 2002). Among the various definitions of terrorism that exist is the universal notion that terrorism uses violence ,targets non-combatants, is intended to intimidate and creates a state of terror. Importantly, all definitions agree that fear is the ultimate aim of terrorism. Fear is perhaps the most intense of human emotions and can manifest itself in a variety of ways. Fear can be a rational response to the presence of a real danger or an irrational response to an imaginary danger ;it can parlays or it can motivate ;it can serve a political purpose or it can serve a deep psychological need, it can be instinctive, to our psychological makeup or it can be historically specific. Private fears, such as phobias, are legacies of individual psychologies and experiences. The fear of terrorism however, is typically a community fear arising out of conflicts between societies. Community fear impels societies tore-affirm their collective allegiance to a set of common political values and to mobilize against an identified threat to these values. This often finds expression in aggression, marginalization, alienation and rejection of anything or anyone who challenges the shared values and cultural world views of a particular society. Since the terrorist attacks on the World Trade Centre and the Pentagon on 11 September 2001, a new discourse of terrorism has emerged as a way of expressing how the world has changed and defining the way things are today(Altheide,2004).

Terrorism has become the new metonym for our time where the ‘war on terror’ refers to a perpetual state of alertness as well as a range of strategic operations, border control policies, internal security measures and public awareness campaigns such as ‘be alert, not alarmed’(Aly, 2005). The ‘atmosphere’ of terror has permeated the construction of the Western world as constantly at threat of terrorism. The media and political construction of September 11 and the subsequent ‘war on terror’ is one in which the West is in a perpetual state of alert from a foreign, alien, politically defined ‘other’, where, as Brian Massumi (2005) states, “Insecurity…is the new normal” (p. 31). The evolving media and popular discourse on terrorism frames the war on terror as a global battle between‘ us’ and‘ them ’and‘ the West’ and‘ others’, whereby the ‘others’ become the objects of fear, concern and suspicion. Framed in a rhetoric that portrays it as a battle for the Western values of democracy and freedom, the ‘war on terror’ becomes not just an event in space and time but a metonym for a new world order drawing on distinctions between ‘us’ and ‘them’ and ‘the West ’and ‘others’ and motivating collective identity based on a construction of ‘us’ as victims and ‘them’ as the objects off ear, concern and suspicion.

The rescued in the ‘war on terror’ is characterised by the familiar invocation of terms like democracy and freedom to make distinctions between ‘the West and the rest’ and to legitimize references to civilized and uncivilized worlds. In his speech delivered at the United Nations Security Council Ministerial Session on Terrorism on January 20, 2003, Colin Powell invoked the rhetoric of a clash of civilizations and urged, “We must rid the civilized world of this cancer…. We must rise to the challenge with actions that will rid the globe of terrorism and create a world in which all God’s children can live without fear”. US President George Bush, in his address to the joint houses of Congress shortly after September 11 stated, “This is the world’s fight. This is civilization’s fight” (cited in Brown 2002, p. 295). The political discourse on terrorism in Australia is one in which Australia is recurrently portrayed as being at threat of an imminent terrorist attack. In a series of mediare leases since the September 11 attacks, Australia’s Prime Minister John Howard has recurrently referred to Australia as being at imminent threat of a terrorist attack. In December2002thePrimeMinisterreleasedthefirst of what was to be many counter-terrorism packages and issued a media release stating, “Australia has been at a heightened level of national security alert since September 11 2001. This extended period of heightened alert for acts of terrorism is unprecedented in Australia’s history” (National Security Campaign, 2002).

No time to compare samples?
Hire a Writer

✓Full confidentiality ✓No hidden charges ✓No plagiarism

Earlier that year, after the Bali bombings in Indonesia in October, the Australian Prime Minister announced amendments to Australia’s counter-terrorism laws, reiterated his previous statements about security and added that the Bali bombings were a personal attack on Australia, “The terrorist attacks on the United States last year revealed that we are now operating in a new security environment. The Bali bombings tragically brought that directly and personally home to Australians” (Counter-terrorism review, 2002). In a media release on the strengthening of the counter terrorism laws, the Prime Minister stated, “while we have been fortunate not to suffer a terrorist attack on our soil, Australians have been the victims of attack overseas and Australia itself has been a target for terrorist in the past”. In reference to the need for legislative reform, the Prime Minister referred specifically to the circumstances of the London terror attacks, “The terrorist attacks on the London transport system in July have raised new issues for Australia and highlighted the need for further ramen dements to our laws”(Counterterrorism laws strengthened, 2005). The government’s apparent insistence that Australia is at threat of an imminent terrorist attack is captured in the National Security Information Campaign, “Let’s Look out for Australia”, first launched in December 2002. In September 2004, a new phase of the campaign was launched entitled “Help Protect Australia from Terrorism”. The campaign includes television, press, transit and outdoor advertising urging Australians to report “possible signs of terrorism.

International Diversity

International Security Hotline

The use of both visual and print media ensures that the campaign is highly visible to Australians and communicates a message that Australians need to be consistently vigilant about the threat of terrorism. The media and popular discourse on terrorism in Australia has evolved into a debate on the Islamic presence in Australia portrayed as a clash of cultural values. This discourse has been assisted by comments from Federal politicians. In an address to the Sydney Institute on 23 February 2006 on the topic of Australian Citizenship, the Federal Treasurer, Peter Costello, addressing the audience on Australia’s democratic tradition stated that those who oppose democratic legislature and do not abide by Australia’s laws should be refused Australian citizenship. He immediately followed this comment with a reference to terrorists and those who support them and then proceeded single out Muslims as those who have “strong objections” to the Australian values of “loyalty, democracy, tolerance, the rule of law…” (Costello, 2006). Shortly afterwards, the Federal Government announced its intention to introduce a formal citizenship test designed to test commitment to a set of ill defined ‘Australian values’. The construction of the war on terror as a global battle between ‘the West and the rest’ imbues the fear of terrorism with redemptive qualities, enabling and facilitating behavioral responses associated with a reaffirmation of identity and membership of a collective while simultaneously denying membership to that collective to those perceived to be“ other”. This response has found expression in the perception of Islam, and by association Australian Muslims, as an alien, culturally incompatible and ominous other.

The psychological impact of terrorism is not limited simply to how people function in the wake of discrete attacks. Anticipating future terrorist attacks can also be extremely debilitating in terms of psychological functioning (Somer, Tamir, Maguen, & Litz, 2005). Zimbardo (2003) has referred to this phenomenon as a “Pretraumatic Stress Syndrome” as it relates to the government’s color coded national alert system. Although research following the attacks of September 11, 2001, has shown that rates of psychopathology specific to 9/11 have generally returned to baseline after spiking immediately after the attacks (Galea et al. , 2003; Schuster et al. , 2001; Silver, Holman, McIntosh, Poulin, & Gil-Rivas, 2002), there is preliminary research (Kramer, Brown, Spielman, Giosan, & Rothrock, 2004; Sinclair & LoCicero, 2006) and polling evidence (Polling Report, 2005) to suggest that people remain quite fearful of future terrorism. These fears escalate substantially after large-scale attacks, such as following those in Bali in 2002, Madrid in 2004, and London in 2005 (Polling Report, 2005). Terror management theory (TMT) is useful for purposes of understanding how people function under the threat of terrorism (Pyszczynski, Solomon, & Greenberg, 2003). Following attacks such as 9/11/2001, TMT would assume that mortality salience, or the conscious realization that death is inevitable, becomes omnipresent. As attacks continue across the world and as the general population comes to focus more on these threats, mortality salience and fears of death increase. Two variables have been shown to moderate these fears: (a) a sense of connectedness to culture, or social connection, and (b) the belief that self is an important and consequential contributor within culture, or self-efficacy. Actively participating in a meaningful reality generates a sense of purpose, stability.

The rationality of decision-making processes occupies a central place in the literature on strategic decision-making (Elbanna, 2006; Miller et al. , 1996). Inconsistency among the results of previous studies on strategic decision rationality, concerning for example, the relationship between organization size and rational decision processes (cf. Dean and Sharfman, 1993b; Fredrickson and Iaquinto, 1989; Kukalls, 1991; Papadakis et al. , 1998), indicates the need for further research to investigate the role of the context in strategic decision rationality. Indeed, Pettigrew (2003) argues that rationality in strategic decision processes cannot be properly understood unless we understand its context. This view postulates that the context in which strategic decision rationality takes place has a marked impact. The term ‘context’ refers to the characteristics of decision-makers, decision-specific characteristics, features of the external environment and those of the firm itself.

Any examination of strategic decision rationality that fails to consider these contextual factors is likely to provide an incomplete and perhaps inaccurate picture (Hough and White, 2003). Papadakis and Barwise (1997a) pointed out the problem of identifying key influences on the SDMP. Hitt and Tyler (1991) argued that an integration of the factors identified by the different perspectives on strategic decision making would contribute to a better understanding of what influences the SDMP. They examined the SDMP to determine which of three decision-making perspectives – the rational-normative perspective, the external control perspective, and the strategic choice perspective – received the greatest empirical support. Schwenk (1995) recommended more empirical research of the kind exemplified by Hitt and Tyler’s study in order to examine the predictive power of alternative perspectives.

Following Schwenk’s recommendation, Brouthers et al. (2000) examined two perspectives concerning influences on the SDMP – environmental determinism and strategic choice – to test which receives the greatest empirical support. However, very few studies have adopted multiple perspectives and examined their predictive power taking the others into account (Child et al. , 2003).

Risk Taking and Performance

Next we tested the link between risk taking and decision making. Earlier research has found that the risk-taking dimension is positively related to decision. innovation, and pro activeness empirically. Few outside board members (Cowling, 2003; Schulze et al. , 2001), and weak pressure from external monitors demanding accountability and transparency (Carney, 2005). At least partly as a result of this, it is plausible to argue that firms make decisions, invest in projects, and pursue new venture in a more informal, intuitive, and less calculated way. Put differently, risk taking in firms might not be firmly grounded in systematic and formal procedures and not have enough inclusion of outsiders’ perspectives and opinions (Schulze et al. , 2001, 2003). Therefore, risk taking in entrepreneurial activities in family firms might be less understood and possible outcomes more difficult to predict. If this explanations correct, it seems to support recent arguments for firms to install l formal

Entrepreneurial Orientation, Risk Taking, and Investment Decision Making

Control and monitoring systems, such as active boards, financial controls, and strategic planning, in order to improve performance, despite higher agency costs and risk of losing flexibility (Schulze et al. , 2001, 2003). Better control, evaluation, and external monitoring can support a more calculated risk taking that is guided toward projects that are better evaluated and scrutinized and, thus, whose outcome is better understood. However, this implies an important act of balancing, since the informality, flexibility, and entrepreneurial orientation that characterize risk taking in firms can be harmed by increased formalization This seems to reveal an interesting paradox of risk taking in firms: increased formalization and external monitoring may lead to a risk taking behavior that effect performance, but at the same time, this formalization and external monitoring may stifle the entrepreneurial activities that give rise to these opportunities and risky projects to begin with. Unfortunately, our data do not allow us a more detailed test of this possible explanation for risk taking and fear of terrorism on decision making. We encourage future research to look further into this.

Conclusion

The purpose of this study was to develop a tool, the TCS, to measure the psychological impact of fearing future terrorism and illustrate how these fears have an impact on people’s lives and on economy. Many have also recently recognized the lack of research specific to assessment and treatment following terrorist attacks and have been calling for new screening and treatment methodologies that are terrorism-specific, as opposed to the existing models, which are extrapolated from disaster mental health (Bongar, 2006; Flynn, 2004; Ruzek et al., 2006). The results of this study contribute to the literature in several ways. First, to the best of our knowledge this is the first known study to examine the effects of anticipatory or prospective fears related to terrorism in the general population, as opposed to the bulk of the research that has looked at retrospective psychological reactions to discrete terrorist events. Second, it provides evidence that much of the general public is adversely affected by the threat of future terrorism. . Third, this study illustrates that some people are likely to be more resilient than others in the face of this threat and allows us to predict that resiliency is more likely for those who have higher self-esteem and experience themselves as more socially connected. . Fourth, this study would suggest that those who are affected by this threat and who engage in catastrophic thinking related to terrorism are more likely to report symptoms of anxiety, general stress, and depression. Likewise, it illustrates that there is a relationship between terrorism catastrophizing and risk taking, where people who catastrophize more are going to be more likely to avoid flying, using public transportation, going into public places, voting, socializing with others from different ethnic backgrounds, living or working in cities or in skyscrapers, vacationing in certain places, and consuming media coverage related to terrorism.

We had formulated research aims and objectives too broadly. We can specify in which ways the formulation of research aims and objectives could be narrowed so that the level of focus of the study could be increased. Regardless of our choice of data collection method. Additional methods of data collection could have increased the scope and depth of analyses and this statement would be more authentic. Data collection method of focus group could also be used in addition to questionnaire to get a fuller picture about the level of effectiveness of fear of terrorism. We do not have an extensive experience in primary data collection there is a great chance that the nature of implementation of data collection method. Regardless of the choice of the research area. Because we don’t have many years of experience of conducing researches and producing academic papers of such a large size individually, the scope and depth of discussions in our paper is compromised in many levels compared to the works of experienced scholars.

You can receive your plagiarism free paper on any topic in 3 hours!

*minimum deadline

Cite this Essay

To export a reference to this article please select a referencing style below

Copy to Clipboard
Effect of Terrorism on Risk Taking and Investment Decision. (2020, September 17). WritingBros. Retrieved March 29, 2024, from https://writingbros.com/essay-examples/effect-of-terrorism-on-risk-taking-and-investment-decision/
“Effect of Terrorism on Risk Taking and Investment Decision.” WritingBros, 17 Sept. 2020, writingbros.com/essay-examples/effect-of-terrorism-on-risk-taking-and-investment-decision/
Effect of Terrorism on Risk Taking and Investment Decision. [online]. Available at: <https://writingbros.com/essay-examples/effect-of-terrorism-on-risk-taking-and-investment-decision/> [Accessed 29 Mar. 2024].
Effect of Terrorism on Risk Taking and Investment Decision [Internet]. WritingBros. 2020 Sept 17 [cited 2024 Mar 29]. Available from: https://writingbros.com/essay-examples/effect-of-terrorism-on-risk-taking-and-investment-decision/
Copy to Clipboard

Need writing help?

You can always rely on us no matter what type of paper you need

Order My Paper

*No hidden charges

/