Corporate Strategies Under International Terrorism And Adversity
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The results of the study showed that when a larger country in terms of GDP is targeted, its smaller trading partners suffer in the immediate and intermediate term. The likelihood of a substantial decline in the equities markets of the smaller trade partner is observed to be 5. The decline is substantial, averaging The sudden uncertainty created by terrorist attacks brings into question the future economic viability of global leaders and developing nations alike.
Due to the connectivity between global marketplaces, the impact of a large scale terror attack is likely to be widespread and substantial.
Market Fallout: Acts of Terror In 2017
While intraday and intermediate volatilities typically spike amid a major terror attack, financial markets prove resilient. This point is emphasized by the work of Chen and Siems through their synopsis of the recovery of global equities markets in the period immediately following the September 11, attacks on the United States. Listed below is the number of days it took each of the ten largest international capital markets to return to valuation levels seen immediately before September 11,  :.
While many factors must be taken into account when examining the time it took for each global market to recover, the important point is that each managed to do so. The immediate sell-off and subsequent loss in value of the equities indices was only temporary. Recovery may not have been universal on a company-by company basis, but in the aggregate, confidence and value from market participants did return relatively short order. The overriding theme of terrorism is the creation of fear. As mentioned, fear in the financial arena typically leads to short-term volatility, which is likely to spread from market to market.
In an attempt to combat the risk created by turbulent markets produced by a terror attack, traders and investors often rapidly transfer capital into "safe-haven" assets. A safe-haven asset is one that is anticipated to retain or gain value in the event that other avenues of investment have depreciated.
As uncertainty raises its head, market participants commonly take an aggressive approach to either exiting the market altogether or moving capital into these types of instruments. Financial safe-havens may exist as commodities, currencies or debt instruments. Listed below are a few of the most traditional safe-haven assets:. Although the gains posted by commodities such as gold, bonds and assorted currencies during the time surrounding a terror attack may be fleeting, it is important to recognise the spike in market participation and volatility during such periods. As a terror attack unfolds, it is common for traders and investors located around the world to shift their focus towards "safer" asset classes.
This may prompt strength in certain financial instruments and weakness in others. Financial markets are often cited as a barometer of national or regional health. A market's sensitivity to uncertainty, and ability to recover after a shock, speak to the flexibility of the global financial structure. Terrorism creates uncertainty, and as a general rule, markets do not like uncertainty.
Volatilities ensue, with participants choosing to transfer assets to safe-havens or exit the market altogether. Initial economic fallout from a terrorist attack may be widespread and severe, but over time markets do begin to exhibit more rational behaviour and work towards recovery. The globalisation of economics and the nature of business have created an atmosphere of connectivity between the nations and marketplaces of the world.
Advances in technology have made the near-instantaneous spread of news to the far corners of globe possible. The very instant a happening with the significance of a terrorist attack occurs, the financial world knows about it and conducts business accordingly. Unfortunately, the risk and influence of terrorism upon the international capital markets is very real. While attacks are unpredictable in nature, individuals must respect their impact while having a definitive plan of action to deal with adversity should the situation arise.
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As such, there are key differences that distinguish them from real accounts; including but not limited to, the lack of dependence on real-time market liquidity, a delay in pricing, and the availability of some products which may not be tradable on live accounts. There may be instances where margin requirements differ from those of live accounts as updates to demo accounts may not always coincide with those of real accounts. Global Economies. Market Fallout: Acts of Terror In In the years and '17, unexpected terror attacks became more prevalent than in previous years.
The Impact Of Terrorism Upon The Marketplace The unpredictability of a terror attack is the mechanism by which confusion is created within a specific financial market or group of markets. As a result, an affected marketplace may experience several direct and indirect consequences: Short-term volatility : Sudden pricing fluctuations may occur as a result of a spike in market participation created by uncertainty related to the terror attack.
For instance, the ability to suspend trade through the use of a "circuit breaker" has been enacted in many markets around the world to limit exposure attributed to terror attacks. The Global Impact Of Terrorism: The Spillover Effect Trading and investing within the financial markets is an international endeavour, with increasing levels of globalisation leading to an advancing interrelationship between the markets themselves.
Violence, Terrorism and Security (MA)
Market Resiliency While intraday and intermediate volatilities typically spike amid a major terror attack, financial markets prove resilient. Listed below is the number of days it took each of the ten largest international capital markets to return to valuation levels seen immediately before September 11,  : NYSE: 37 London: 22 Tokyo: 14 Frankfurt: 23 Paris: 31 Toronto: 44 Amsterdam: 42 Switzerland: 30 Italy: 31 Hong Kong: 20 While many factors must be taken into account when examining the time it took for each global market to recover, the important point is that each managed to do so.
Listed below are a few of the most traditional safe-haven assets: Gold : In troubled times, gold has been one of the go-to modes of wealth preservation. It provides a hedge against the devaluation of fiat currency in addition to holding a physical value. The March 22, Brussels terrorist attack provided an example of traders and investors rushing into gold during uncertain times.
Economist Brian Wesbury analyzed the effects of the attacks on the economy.
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Failure to prepare for a potential terrorist act may create a liability for business. In Company Primer: Preparedness and Response Planning for Terrorist and Bioterrorist Attacks , the executive summary explains that terrorism is now considered a foreseeable risk. The result of these two rulings is that companies can be held liable if they cannot demonstrate that they have taken reasonable actions to prepare for, and respond to, a terrorist attack.
A few basic guidelines can help ensure that you develop an efficient and effective preparedness plan. Begin by carefully selecting the team responsible for the creation, execution, and refinement of the plan. The team should be cross-functional, and represent multiple levels of responsibility within your organization — including senior management. That means examining everything from potential supply chain vulnerabilities to creating redundant payroll, manufacturing, IT, customer service and other core functions at additional locations.
It also means securing vital information off-site. Identify the most efficient and effective methods for communicating with leadership, employees, and critically important external parties — ranging from customers to first responders. Ensure that a crisis communication plan has been put in place that enumerates how communication with employees and other constituencies will be maintained in the wake of an emergency. Make sure you learn about the costs, coverage, and potential limitations of such insurance.
That means drills for your employees on how to execute the key points within the plan.
Corporate strategies under international terrorism and adversity - University Of Pikeville
While going through this exercise, it is important to remember that there is a balancing point between preparedness and provoking unnecessary anxiety. Few managers are trained to develop detailed preparedness plans. Fortunately, there are abundant resources available on the web to help your business accomplish this objective, including:. We should all recognize their unrelenting focus and determined intent to attack America.
Making common sense preparations for a possible attack on our Homeland should be a consideration for all Americans. Terrorism, by definition, will always provoke fear.