“EFFECTOF TERRORISM ON RISK TAKING AND INVESTMENT DECISION”ABSTRACT:This article focuses on fear of terrorism as oneimportant factors effecting risk taking and investment decision in today’seconomy.

We argue that external security threats can undermine incumbent targetgovernments by exposing foreign policy failures and damaging society’s generalwell-being. Identifying who is at risk, how they are at risk in terms of whichcognitive processes are affected, and the degree to which they are at risk. INTRODUCTION:Terrorism is a hazard to human life and materialprosperity that should be addressed in a sensible manner whereby the benefitsof actions to contain it outweigh the costs. The relationship between fear ofterrorism and risk taking has long puzzled researchers. Research at theindividual level has found little empirical evidence to support the idea thatentrepreneurs take considerable risks (Entrepreneurial Orientation, RiskTaking, and Performance in Family Firms by Lucia Naldi, Mattias Nordqvist,Karin Sjöberg, Johan Wiklund). Over the past decade, the changing politicallandscape has dictated that public, private, and governmental organizations notonly understand terrorism risk, but also develop a proactive plan to assessand/or manage this risk. With the increased threat of terrorism, both in theUnited States and abroad, public, private, and governmental agencies face anincreased need to understand and manage the risk to their employees andorganizational assets due to the terrorism risk (Managing Terrorism Risk byNathan C. Gould)This paper critically analyses the importance ofrisk management techniques in the war on terror.

From the protection of bordersto international financial flows, from airport security to daily financialtransactions, risk assessment is emerging as the most important way in whichterrorist danger is made measurable and manageable. However, we argue that therisk-based approach results in the displacement of risk onto marginal groups,while its effectiveness in the war on terror remains questionable. Risk is an importantcomponent of every investment, thus it is necessary to analyse it as both, theobjective component of the investment, and as the subjective factor of theinvestment decision making. In the war on terrorism, it is important tounderstand how power is exercised through a complex policy constellationincluding regulatory state bodies, international institutions, industryself-regulating bodies and private risk assessment firms.

This does not simplyentail a shift from public to private authority, but entails more precisely theenduring and even enhanced power of particular state agencies, in closecooperation with international institutions and private risk assessment firms(Governance, risk and dataveillance in the war on terror, author LouiseAmooreMarieke De Goede).   Thispaper 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 ofinvestment in long-term but effects are small and insignificant for short-terminvestment. The presenceof a major terrorist incident in a district in a yearreduces long-term fixedinvestment by around 17% after controlling for district. LiteraturereviewFOLLOWINGTHE TERRORIST Attacks on the World Trade Centre and the Pentagonin2001, polls in the United States revealed a heightened level of fear andanxiety about the likelihood of further terrorist attacks. According to onepoll, 52 percent of Americans said they could imagine themselves or a loved oneas a victim of a terrorist attack (Kakutani, 2001). Despite the fact that riskassessment studies in Australia underline that the actual risk of a terroristattack is marginal in comparison to many other mortality risks such as smokingand car accidents(Mueller,2004;Viscusi, 2003), Australian polls also indicatedheightened levels of fear and anxiety about a possible terrorist attack inAustralia. According to a poll published in the Sydney Morning Herald in April2004, 68 percent of Australians believed that Australia was at threat of animminent terrorist attack (Michelson, 2005; Viscusi, 2003).

A national projectat Edith Cowan University funded by an Australian Research Council DiscoveryGrant (Safeguarding Australia) examines the nature of the fear of terrorismoperating within the Australian community since the September 11 terroristattacks. The projects incorporate qualitative research study on audienceconstructions of the media and popular discourse on terrorism. The findings ofthis study were used to inform the development of an innovative quantitativemetric of fear designed to measure how Australians are responding to the fearof terrorism.

Research into the effects of fear on social behavior hastraditionally focused on two patterns of behavioral responses to fear:restrictive behaviors which assume that people constrain their behavior toavoid circumstances considered unsafe, and assertive behaviors which involvespeople adopting protective behaviors in circumstances considered to be unsafe(Liska, 1988). An analysis of empirical evidence collected was conducted in thefirst stage of the project to develop a construct typology of fear (Becker,1940). The results pointed to the fear of terrorism as affecting bothrestrictive and protective behaviors. As the first of its kind, the metric offear measures the extent to which Australians are constraining their behaviorsand adopting protective behaviors in response to the fear of terrorism.  TheFear of Terrorism There is no internationally accepted, unitarydefinition of terrorism. A brief review of the literature on terrorism revealsover 100definitions.InAustralia, terrorism is defined by the Australian DefenseForce as the “use or threatened use of violence for political ends or for thepurpose of putting the public or any section of the public infear”(Martyn,2002).Among the various definitions of terrorism that exist is theuniversal notion that terrorism uses violence ,targets non-combatants, isintended to intimidate and creates a state of terror.

Importantly, alldefinitions agree that fear is the ultimate aim of terrorism. Fear is perhapsthe most intense of human emotions and can manifest itself in a variety ofways. Fear can be a rational response to the presence of a real danger or anirrational 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, toour psychological makeup or it can be historically specific. Private fears,such as phobias, are legacies of individual psychologies and experiences. Thefear of terrorism however, is typically a community fear arising out ofconflicts between societies.

Community fear impels societies tore-affirm theircollective allegiance to a set of common political values and to mobilizeagainst an identified threat to these values. This often finds expression inaggression, marginalization, alienation and rejection of anything or anyone whochallenges the shared values and cultural world views of a particular society.Since the terrorist attacks on the World Trade Centre and the Pentagon on 11September 2001, a new discourse of terrorism has emerged as a way of expressinghow the world has changed and defining the way things aretoday(Altheide,2004).Terrorism has become the new metonym for our time wherethe ‘war on terror’ refers to a perpetual state of alertness as well as a rangeof strategic operations, border control policies, internal security measuresand public awareness campaigns such as ‘be alert, not alarmed'(Aly, 2005). The’atmosphere’ of terror has permeated the construction of the Western world asconstantly at threat of terrorism.

The media and political construction ofSeptember 11 and the subsequent ‘war on terror’ is one in which the West is ina 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 terroras a global battle between’ us’ and’ them ‘and’ the West’ and’ others’, wherebythe ‘others’ become the objects of fear, concern and suspicion. Framed in arhetoric that portrays it as a battle for the Western values of democracy andfreedom, the ‘war on terror’ becomes not just an event in space and time but ametonym for a new world order drawing on distinctions between ‘us’ and’ them’and ‘the West ‘and’ others’ and motivating collective identity based on aconstruction of ‘us’ as victims and ‘them’ as the objects off ear, concern andsuspicion. The recued in the ‘war on terro0r’ is characterised by the familiarinvocation of terms like democracy and freedom to make distinctions between’the West and the rest’ and to legitimize references to civilized anduncivilized worlds.

In his speech delivered at the United Nations SecurityCouncil Ministerial Session on TerrorismonJanuary20, 2003, Colin Powell invokedthe rhetoric of a clash of civilizations and urged “We must rid the civilizedworld of this cancer…. We must rise to the challenge with actions that will ridthe globe of terrorism and create a world in which all God’s children can livewithout fear”. US President George Bush, in his address to the joint houses ofCongress shortly after September 11 stated” This is the world’s fight. This is civilization’s fight” (cited in Brown2002, p. 295). The political discourse on terrorism in Australia is one inwhich Australia is recurrently portrayed as being at threat of an imminentterrorist attack. In a series of mediare leases since the September 11 attacks,Australia’s Prime Minister John Howard has recurrently referred to Australia asbeing at imminent threat of a terrorist attack. InDecember2002thePrimeMinisterreleasedthefirst of what was to be manycounter-terrorism packages and issued a media release stating “Australia hasbeen at a heightened level of national security alert since September 11 2001.

This extended period of heightened alert for acts of terrorism is unprecedentedin Australia’s history” (National Security Campaign,2002).Earlier that year,after the Bali bombings in Indonesia in October, the Australian Prime Ministerannounced amendments to Australia’s counter-terrorism laws, reiterated hisprevious statements about security and added that the Bali bombings were apersonal attack on Australia, “The terrorist attacks on the United States lastyear revealed that we are now operating in a new security environment. The Bali bombings tragically brought thatdirectly and personally home to Australians” (Counter-terrorism review, 2002).

In a media release on the strengthening of the counter terrorism laws, thePrime Minister stated, “while we have been fortunate not to suffer a terroristattack on our soil, Australians have been the victims of attack overseas andAustralia itself has been a target for terrorist in the past”. In reference tothe need for legislative reform, the Prime Minister referred specifically tothe circumstances of the London terror attacks, “The terrorist attacks on theLondon transport system in July have raised new issues for Australia andhighlighted the need for further ramen dements to our laws”(Counterterrorismlaws strengthened, 2005). The government’s apparent insistence that Australiais at threat of an imminent terrorist attack is captured in the NationalSecurity Information Campaign, “Let’s Look out for Australia”, first launchedin December 2002. In September 2004, a new phase of the campaign was launchedentitled “Help Protect Australia from Terrorism” .The campaign includestelevision, press, transit and outdoor advertising urging Australians to report”possible signs of terrorism.

INTERNATIONAL DIVERSITY,International Security Hotline”. The use of bothvisual and print media ensures that the campaign is highly visible toAustralians and communicates a message that Australians need to be consistentlyvigilant about the threat of terrorism. The media and popular discourse onterrorism in Australia has evolved into a debate on the Islamic presence inAustralia portrayed as a clash of cultural values.

This discourse has beenassisted by comments from Federal politicians. In an address to the Sydney Instituteon 23 February 2006 on the topic of Australian Citizenship, the FederalTreasurer, Peter Costello, addressing the audience on Australia’s democratictradition stated that those who oppose democratic legislature and do not abideby Australia’s laws should be refused Australian citizenship. He immediatelyfollowed this comment with a reference to terrorists and those who support themand then proceeded single out Muslims as those who have “strong objections” tothe Australian values of “loyalty, democracy, tolerance, the rule of law…”(Costello, 2006). Shortly afterwards, the Federal Government announced itsintention to introduce a formal citizenship test designed to test commitment toa set of ill defined ‘Australian values’. The construction of the war on terroras a global battle between ‘the West and the rest’ imbues the fear of terrorismwith redemptive qualities, enabling and facilitating behavioral responsesassociated with a reaffirmation of identity and membership of a collectivewhile simultaneously denying membership to that collective to those perceivedto be” other”. This response has found expression in the perception of Islam,and by association Australian Muslims, as an alien, culturally incompatible andominous other.The psychological impact of terrorism is not limitedsimply to how people function in the wake of discrete attacks.

Anticipatingfuture terrorist attacks can also be extremely debilitating in terms ofpsychological functioning (Somer, Tamir, Maguen, & Litz, 2005). Zimbardo(2003) has referred to this phenomenon as a “Pretraumatic Stress Syndrome” asit relates to the government’s color coded national alert system. Althoughresearch following the attacks of September 11, 2001, has shown that rates ofpsychopathology specific to 9/11 have generally returned to baseline afterspiking immediately after the attacks (Galea et al.

, 2003; Schuster et al.,2001; Silver, Holman, McIntosh, Poulin, & Gil-Rivas, 2002), there ispreliminary research (Kramer, Brown, Spielman, Giosan, & Rothrock, 2004;Sinclair & LoCicero, 2006) and polling evidence (Polling Report, 2005) tosuggest that people remain quite fearful of future terrorism. These fearsescalate substantially after large-scale attacks, such as following those inBali in 2002, Madrid in 2004, and London in 2005 (Polling Report, 2005). Terrormanagement theory (TMT) is useful for purposes of understanding how peoplefunction under the threat of terrorism (Pyszczynski, Solomon, & Greenberg,2003). Following attacks such as 9/11/2001, TMT would assume that mortalitysalience, or the conscious realization that death is inevitable, becomesomnipresent. As attacks continue across the world and as the general populationcomes to focus more on these threats, mortality salience and fears of deathincrease. Two variables have been shown to moderate these fears: (a) a sense ofconnectedness to culture, or social connection, and (b) the belief that self isan 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 processesoccupies a central place in the literature on strategic decision-making(Elbanna, 2006; Miller et al., 1996). Inconsistency among the results ofprevious studies on strategic decision rationality, concerning for example, therelationship 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 investigatethe role of the context in strategic decision rationality.

Indeed, Pettigrew(2003) argues that rationality in strategic decision processes cannot beproperly understood unless we understand its context. This view postulates thatthe context in which strategic decision rationality takes place has a markedimpact. The term ‘context’ refers to the characteristics of decision-makers,decision-speci?c characteristics, features of the external environment andthose of the ?rm itself. Any examination of strategic decision rationality thatfails to consider these contextual factors is likely to provide an incompleteand perhaps inaccurate picture (Hough and White, 2003).

Papadakis and Barwise(1997a) pointed out the problem of identifying key in?uences on the SDMP. Hittand Tyler (1991) argued that an integration of the factors identi?ed by thedifferent perspectives on strategic decision making would contribute to abetter understanding of what in?uences the SDMP. They examined the SDMP todetermine which of three decision-making perspectives – the rational-normativeperspective, the external control perspective, and the strategic choiceperspective – received the greatest empirical support. Schwenk (1995)recommended more empirical research of the kind exempli?ed by Hitt and Tyler’sstudy in order to examine the predictive power of alternative perspectives.

Following Schwenk’s recommendation, Brouthers et al. (2000) examined twoperspectives concerning in?uences on the SDMP – environmental determinism andstrategic choice – to test which receives the greatest empirical support.However, very few studies have adopted multiple perspectives and examined theirpredictive power taking the others into account (Child et al., 2003).Risk Taking and Performance Next we tested the linkbetween risk taking and decision making. Earlier research has found that therisk-taking dimension is positively related to decision .

innovation, and proactiveness empirically. Few outside board members (Cowling, 2003; Schulze etal., 2001), and weak pressure from external monitors demanding accountabilityand transparency (Carney, 2005).

At least partly as a result of this, it isplausible to argue that ?rms make decisions, invest in projects, and pursue newventure in a more informal, intuitive, and less calculated way. Putdifferently, risk taking in ?rms might not be ?rmly grounded in systematic andformal procedures and not have enough inclusion of outsiders’ perspectives andopinions (Schulze et al., 2001, 2003). Therefore, risk taking inentrepreneurial activities in family ?rms might be less understood and possibleoutcomes more dif?cult to predict.

If this explanations correct, it seems tosupport recent arguments for ?rms to install l formalEntrepreneurial Orientation, Risk Taking, andinvestment decision making. control and monitoring systems, such as activeboards, ?nancial controls, and strategic planning, in order to improveperformance, despite higher agency costs and risk of losing ?exibility (Schulzeet al., 2001, 2003). Better control, evaluation, and external monitoring cansupport a more calculated risk taking that is guided toward projects that arebetter evaluated and scrutinized and, thus, whose outcome is better understood.However, this implies an important act of balancing, since the informality,?exibility, and entrepreneurial orientation that characterize risk taking in?rms can be harmed by increased formalization This seems to reveal aninteresting paradox of risk taking in ?rms: increased formalization and external monitoring may lead to a risktaking behavior that effect  performance, but at the same time, this formalization and externalmonitoring may sti?e the entrepreneurial activities that give rise to theseopportunities and risky projects to begin with.

Unfortunately, our data do notallow us a more detailed test of this possible explanation for risk taking andfear of terrorism on decision making. We encourage future research to lookfurther into this.Hypothesis:  fear of terrorism as affecting both riskraking and investment decision making.H1:  Fear ofterrorism has positive effect on risk taking.H0: Fear of terrorism has no significant effect onrisk taking.      Fear Of Terrorism Risk Taking Investment Decision  Maturity MODEL:               CONCLUSION:The purpose of this study was to develop a tool, theTCS, to measure the psychological impact of fearing future terrorism andillustrate how these fears have an impact on people’s lives and oneconomy.  Many have also recentlyrecognized the lack of research specific to assessment and treatment followingterrorist attacks and have been calling for new screening and treatmentmethodologies 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 inseveral ways. First, to the best of our knowledge this is the first known studyto examine the effects of anticipatory or prospective fears related toterrorism in the general population, as opposed to the bulk of the researchthat has looked at retrospective psychological reactions to discrete terroristevents. Second, it provides evidence that much of the general public isadversely affected by the threat of future terrorism.  .

Third, this study illustrates that somepeople are likely to be more resilient than others in the face of this threatand allows us to predict that resiliency is more likely for those who havehigher self-esteem and experience themselves as more socially connected. .Fourth, this study would suggest that those who are affected by this threat andwho engage in catastrophic thinking related to terrorism are more likely toreport symptoms of anxiety, general stress, and depression.

Likewise, itillustrates that there is a relationship between terrorism catastrophizing andrisk taking, where people who catastrophize more are going to be more likely toavoid flying, using public transportation, going into public places, voting,socializing with others from different ethnic backgrounds, living or working incities or in skyscrapers, vacationing in certain places, and consuming mediacoverage related to terrorism.We had formulated research aims and objectives too broadly. We can specifyin which ways the formulation of research aims and objectives could be narrowedso that the level of focus of the study could be increased.

Regardless of our choice of data collection method. Additional methods ofdata collection could have increased the scope and depth of analyses and thisstatement would be more authentic.Data collection method of focus group couldalso be used in addition to questionnaire to get a fuller picture about thelevel of effectiveness of fear of terrorism.

  We do not have an extensive experience in primary data collectionthere is a great chance that the nature of implementation of data collectionmethod.Regardless of the choice of the research area. Because wedon’t have many years of experience of conducing researches and producingacademic papers of such a large size individually, the scope and depth ofdiscussions in our paper is compromised in many levels compared to the works ofexperienced scholars.  

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