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CREATE OVERVIEW

CREATE OVERVIEW. Detlof von Winterfeldt Professor of Industrial and Systems Engineering Professor of Public Policy and Management Center for Risk and Economic Analysis of Terrorism Events University of Southern California Fall, 2008. Four Years of CREATE. March, 2004. July, 2008.

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CREATE OVERVIEW

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  1. CREATE OVERVIEW Detlof von Winterfeldt Professor of Industrial and Systems Engineering Professor of Public Policy and Management Center for Risk and Economic Analysis of Terrorism Events University of Southern California Fall, 2008

  2. Four Years of CREATE March, 2004 July, 2008

  3. Why Risk Analysis? “….We have to identify and prioritize risks -- understanding the threat, the vulnerability and the consequence. And then we have to apply our resources in a cost-effective manner….. “

  4. Why Economic Analysis? “If their economy is destroyed, they will be busy with their own affairs rather than enslaving the weak peoples. It is very important to concentrate on hitting the US economy through all possible means.”

  5. CREATE is an Interdisciplinary Center • Social Science • Economics • Psychology • Political Science • Engineering • Industrial and Systems Engineering (OR) • Civil Engineering • Computer Science • Other • Public Policy • Decision Science • International Relations

  6. CREATE is an (Inter)national Center

  7. CREATE Researchers • 40 faculty members • 40 tenure track faculty members • 10 adjunct, research professors, etc. • 20 Other Researchers • 6 Postdoctoral Research Associates • 14 research scientists, computer scientists, etc. • 40 Research Assistants • Mix of Ph.D. and Masters students • First batch of Ph.D. students graduated in 2007 • Quality Indicators • Ten researchers with 1,000+ citations (ISI Web of Science) • One member of the NAS, two members of the NAE • Two presidents, four fellows of INFORMS

  8. CREATE Models • Risk Assessment • Probabilistic Risk Analysis • Game Theory • Terrorist Utility Models • Economic Assessment • Advanced Economic Impact Models (I/O and CGE) • Economic Analyses of Terrorist Behavior • Models of Public Responses and Resilience • Risk Management • Dynamic, Adaptive Decision Analysis • Game theoretic models for inspections and patrols • Optimal Resource Allocation Models

  9. Examples of Center Projects and Products Applied Research Projects Analysis of dirty bomb attacks on ports Allocation of funds to critical infrastructure Economic analysis of bioterrorism events Randomization of inspections and patrols Fundamental Research Projects Game theory extensions to terrorism problems Decision analysis with adaptive responses Probabilistic models of terrorist preferences Network reliability and failure models Software Development Risk Analysis Workbench (RAW) MANPADS Decision Tree Software National Interstate Economic Impact Model Randomization software

  10. CREATE Research Framework Risk Assessment Risk Management Economic Assessment

  11. CREATE Research Framework Risk Assessment Threat Assessment Vulnerability Assessment Consequence Assessment

  12. CREATE Research Framework Risk Assessment Threat Assessment Vulnerability Assessment Consequence Assessment Valuation of Direct Econ. Consequences Estimation of Indirect Econ. Consequences Economic Assessment Assessment of Resilient Responses

  13. Overall Framework Economic Assessment Risk Assessment Threat Assessment Vulnerability Assessment Consequence Assessment Valuation Of Direct Consequences Response Recovery Assessment of Indirect Econ. Consequences Prevention Protection Cost-Benefit & Decision Analysis Risk Management

  14. Risk Analysis: Over 30 Years of Experience • Reliability engineering (aerospace industry) • Nuclear power plant risks • Chemical and other industrial risks • Environmental risks • Natural disaster risks • Business, project and R&D risks • Medical risks

  15. Attempts to Apply Risk Analysis to Terrorism • Probabilistic risk analysis • Dynamic adaptive decision tree analysis • Game theory • Vulnerability and risk scoring systems ____________________________________ Hardest Part: Threat Analysis

  16. Lugar Report: Threat Probabilities

  17. Richard Allen Graham Allison Frank Carlucci Bill Cohen James Dobbins Amitai Etzione Bob Galluci Sig Hecker Ron Lehman Michael Moodie Sam Nunn Noman Schwarzkopf Strobe Talbott James Woolsey + 70 others Selected Participants in the Luger Study

  18. Assessing the Threat of Bioterrorism Non-communicable

  19. Expert Elicitation • Elicitation of selection probabilities of 28 agents • Four bioterrorism experts • Two risk analysts (Hora, von Winterfeldt) • Hierarchical elicitation • Software support

  20. Expert Elicitation- Observations • A few biological agents float to the top for all experts (and non-experts) • Worked well with experts who had biological knowledge • Some problems with experts who did not have biological knowledge • Nevertheless: High correlation between experts’ risk assessments (0.87)

  21. Terrorists’ Utility Functions • Develop a muliattribute utility function for terrorists’ preferences for attack modes and targets • Initial focus on Al Quaeda and selected attack modes • Develop an expected utility function • Folding in probability of success • Develop a random expected utility model • Using parameter uncertainty • Derive probabilities of choice • Initially for Al Quade and choice of attack modes

  22. Radical Islamist Fundamentalists’ Goals Attack US Attack Arab States Attack Israel Recruit Followers

  23. Source: Admiral Sullivan, 2006 The expanse of the Caliphate by 1500 included most of Africa, the middle east, much of SW Asia, and SE Europe. In A.D. 900, the Caliphate included most of present day Spain and portions of France and Italy The enemy is focused on the history of the Muslim world – which drives much of the extremist ideology 24

  24. Restoring the Historical Caliphate(Source: Admiral Sullivan, 2006) 25

  25. Low operational expenditures High impact on the United States Increased power base Minimize cost Minimize resources Economic impact Instill fear Human causalities Maximize recruitment Maximize funding ST immediate damage LT ripple effects Maximize pop. support (sympathizers) Minimize “backlash” To Al Qaeda Terrorists’ Value Tree High Value Attack on US

  26. Attack Alternatives Considered

  27. Event Tree: Indicates various possible points of failure Successful Attack Success PS Trigger Event Success PI Failed Attack Interdiction? Failure Success PM 1-PS Failed Attack Material Acquisition? Failure 1-PI Failed Attack Failure 1-PM

  28. Attack Utility (conditional on Success)

  29. Expected Utility of Attack(including event tree uncertainties)

  30. Overall Framework Economic Assessment Risk Assessment Threat Assessment Vulnerability Assessment Consequence Assessment Valuation Of Direct Consequences Response Recovery Assessment of Indirect Econ. Consequences Prevention Protection Cost-Benefit & Decision Analysis Risk Management

  31. Smart Randomization (Tambe et al) Terrorists monitor defenses, exploit patterns Examples: Patrols, inspections, surveillance Randomize defenses, maintain quality

  32. Defender and Attacker Game(Stackelberg game)

  33. Expected Utility of Attacker

  34. Solution • Set p(Defend A) to minimize attackers maximum expected utility • Also maximizes defender’s minimum expected utility • Example: p = 11/17

  35. Extensions • Non-zero sum • Multiple targets • Multiple attackers • Constraints on real world patrols • Fast algorithms • Real world implementation

  36. Assistant for Randomized Monitoring Over Routes (ARMOR) Project An Interdisciplinary Counter-Terrorism Research Partnership: Los Angeles World Airports & The University of Southern California

  37. ARMOR System ARMOR Knowledge Base Provide inputs, constraints DOBSS: GAME THEORY ALGORITHMS Weights for randomization Randomized Schedule generation Schedule evaluation

  38. September 28, 2007 The Element of Surprise To help combat the terrorism threat, officials at Los Angeles International Airport are introducing a bold new idea into their arsenal: random placement of security checkpoints. Can game theory help keep us safe? Security forces work the sidewalk at LAX

  39. Resource Allocation to Protect Infrastructure Assets • Develop practical decision analysis tools for allocating Department of Homeland Security funds • First case study: BZPP Fund Allocation • Conducted with the California Governor's Office of Homeland Security

  40. Selected Sites in California Chemical: High fatality potential Commercial: high threat Dams: Fatality & economic impact potential

  41. “Only” Five Inputs Required per Site • Threat: Probability of Attack (P) • Vulnerability: Probability Attack Succeeds (Q) • Consequences: Expected Loss if Attack Succeeds (L) [$-equivalent losses] • Loss Reduction: Loss Reduction with RMP (0 < R < 1) • Cost: Cost of Risk Reduction (C) Expected loss: No RMP: EL = P∙Q∙L With RMP: EL´ = P∙Q∙L∙(1-R) + C Net loss reduction:(EL - EL´) = P∙Q∙L∙R – C

  42. Sector Comparisons (CREATE) Economic Threat and Risk Fatality Range Impacts Vulnerability Reduction Notes Chemical and Hazmat 1,000-50,000 0.1b – 1.3b Medium Medium High fatalities Dams 100-10,000 ~100b Medium Effective High economics Commercial (Buildings / Tourism) 100-8,000 2b – 10b High Medium High threat Oil Refineries 10-100 0.1b -- 0.6b Low Medium Mostly economics Electrical Grid 10-100 0.7b – 2.8b Low Medium Mostly economics Transportation - Bridges 10-100 0.01b – 0.04b Medium Medium Mostly psychological Transportation - Rail 100-1000 0.5b – 7.4b High Medium Mostly psychological Water Treatment 100-1000 0.1b – 1.3b Low Medium Mostly chemicals Defense Industry Base 10-100 ? Medium Medium DHS/DOE responsibility Postal and Shipping 10-100 ? Medium Medium DHS responsibility Nuclear Power Plants 0-100,000 12b – 40b Medium Medium NRC/DHS responsibility Three Sectors Appeared to Be Higher Risk

  43. Consequence Analysis for Dams

  44. Sector Prioritizations: Dams

  45. Consequence Analysis for Chemical Plants

  46. Observations • CA OHS found the analysis useful • Much improved over previous year • Increased credibility • Sector based prioritization was considered very helpful • Identified critical needs for future analyses: • Threat probability is still a problem • Need to better assess effectiveness of risk reduction • Ongoing work • Develop criteria for assessment of risks • Assess risks and risk reduction effectiveness • Robust allocation models

  47. Some Conclusions • Risk assessment remains difficult • Too many possible attack scenarios – need screening • Adversaries seek vulnerabilities and high impact - need improved threat and vulnerability analysis • Probabilities of threats and attacks shift - need game sciences • Economic impacts are critical • Indirect economic impacts often overshadow direct ones • Public responses can create large indirect economic impacts • Need strategy for addressing public concerns • Risk management focus helps • Focus on what can be done, not what to worry about • Many variables do not matter for decisions • Eliminate clearly inferior options

  48. The Main Challenge:How Secure is Secure Enough? • We will never be completely secure • The costs of increasing security increase dramatically when we get close to zero risk • Increasing security may create other risks, inconveniences, and restrict civil liberties

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