CREATE OVERVIEW

Detlof von WinterfeldtProfessor 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

July, 2008March, 2004

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….. “

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.”

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

CREATE is an (Inter)national Center

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

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

Examples of Center Projects and Products

Applied Research ProjectsAnalysis of dirty bomb attacks on portsAllocation of funds to critical infrastructureEconomic analysis of bioterrorism eventsRandomization of inspections and patrols

Fundamental Research ProjectsGame theory extensions to terrorism problemsDecision analysis with adaptive responsesProbabilistic models of terrorist preferencesNetwork reliability and failure models

Software DevelopmentRisk Analysis Workbench (RAW)MANPADS Decision Tree SoftwareNational Interstate Economic Impact ModelRandomization software

CREATE Research Framework

Risk Assessment

EconomicAssessment

RiskManagement

CREATE Research Framework

Threat Assessment

ConsequenceAssessment

VulnerabilityAssessment

Risk Assessment

CREATE Research Framework

Threat Assessment

ConsequenceAssessment

VulnerabilityAssessment

Valuation ofDirect Econ.

Consequences

Estimation ofIndirect Econ.Consequences

Risk Assessment

Eco

nom

ic A

ssessm

en

t

Assessment ofResilient

Responses

Overall Framework

Threat Assessment

ConsequenceAssessment

VulnerabilityAssessment

Assessment ofIndirect Econ.Consequences

ResponseRecovery

Prevention Protection

Cost-Benefit & Decision Analysis

Risk AssessmentEconomic

Assessment

Risk Management

Valuation Of Direct

Consequences

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

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

Lugar Report: Threat Probabilities

Lugar SurveyProbabilities of Major Attacks

Event

Median Probability (5 Years)

Median Probability (10 Years)

Appr. Sample

Size

Nuclear Attack 10% 20% 80Biological Attack 10% 20% 80Chemical Attack 15% 15% 80Radiological Attack 25% 40% 80

Selected Participants in the Luger Study

• 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

Assessing the Threat of Bioterrorism

Bacillus Anthracias(Anthrax): Communicable Impact Quantity: 100 kilogram fatal to 3 million persons Mortality Rate: 25% to 60%

Bacillus Anthracias(Anthrax): Communicable Impact Quantity: 100 kilogram fatal to 3 million persons Mortality Rate: 25% to 60%

Yersinia pestis

(Plague):

Communicable

Impact Quantity: 1 infected person creates 10 new cases

Mortality Rate: 15% to 60%

Raciness communis(Ricin):Non-Communicable Impact Quanity:1 milligram can kill an adultMortality Rate: 50% to 85%

Non-communicable

Expert Elicitation

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

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)

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

Radical Islamist Fundamentalists’ Goals

Re-establish the Caliphate

Expel US fromMiddle East

Replace SecularGovernments

In Middle East

EliminateIsrael

ExpandMuslim

Influence

Attack US Attack Arab

States

Attack

Israel Recruit

Followers

The expanse of the Caliphate by 1500 included most of Africa, the middle east, much of SW Asia, and SE Europe.

The enemy is focused on the history of the Muslim world – which drives much of the extremist ideology

In A.D. 900, the Caliphate included most of present day Spain and portions of France and Italy

24

Source: Admiral Sullivan, 2006

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

25

Terrorists’ Value Tree

Increasedpower base

Maximizerecruitment

Maximize pop. support

(sympathizers)

Maximizefunding

Minimize“backlash”To Al Qaeda

Lowoperational

expenditures

Minimizecost

Minimizeresources

High impact on theUnited States

Humancausalities

Economicimpact

Instillfear

ST immediatedamage

LT rippleeffects

High Value Attack on US

Attack Alternatives Considered

ALTERNATIVES

No attack (baseline)

IED engine room of naval vessel

Explosion resulting in dam failure

MANPADS attack on airplane

Portable nuclear bomb in major city

Explosions on mass transport(s)

Release of anthrax (movie or sports)

Detonation of dirty bomb

Smallpox release in major city

Event Tree: Indicates various possible points of failure

PM

1-PM

PI

1-PI

PS

1-PS

MaterialAcquisition?

FailedAttack

Failure

Success Interdiction?

FailedAttack

FailedAttack

TriggerEvent

Success

Failure

SuccessfulAttack

Success

Failure

Attack Utility (conditional on Success)

Attack Type Utility (assuming successful attack)

No Attack 0.16

IED 0.18

Dam Explosion 0.17

Manpad 0.16

Portable Nuclear Device 0.45

Transport. Systems 0.17

Anthrax 0.26

Dirty Bomb 0.18

Smallpox 0.46

Expected Utility of Attack(including event tree uncertainties)

Attack Type Expected Utility

No Attack 0.16

IED 0.14

Dam Explosion 0.11

Manpad 0.10

Portable Nuclear Device 0.06

Transport. Systems 0.12

Anthrax 0.11

Dirty Bomb 0.08

Smallpox 0.07

Overall Framework

Threat Assessment

ConsequenceAssessment

VulnerabilityAssessment

Assessment ofIndirect Econ.Consequences

ResponseRecovery

Prevention Protection

Cost-Benefit & Decision Analysis

Risk AssessmentEconomic

Assessment

Risk Management

Valuation Of Direct

Consequences

Smart Randomization (Tambe et al)

• Terrorists monitor defenses, exploit patterns• Examples: Patrols, inspections, surveillance • Randomize defenses, maintain quality

Defender and Attacker Game(Stackelberg game)

AttackA B

Defend A +1,-1 -5,+5

B -10,+10 +1,-1

Expected Utility of Attacker

-1

0

1

2

3

4

5

6

7

8

9

10

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Probabiliy of Defender Choosing A

Att

ac

ke

r's

Ex

pe

cte

d U

tilit

y

u(A)

u(B)

Solution

• Set p(Defend A) to minimize attackers maximum expected utility

• Also maximizes defender’s minimum expected utility

• Example: p = 11/17

Extensions

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

Assistant for Randomized Monitoring Over Assistant for Randomized Monitoring Over Routes (ARMOR) ProjectRoutes (ARMOR) Project

An Interdisciplinary Counter-Terrorism Research Partnership:

Los Angeles World Airports & The University of Southern California

ARMOR SystemARMOR System

DOBSS: GAMETHEORY

ALGORITHMS

Provide inputs, constraints

RandomizedSchedule

generation

Weights forrandomization

Schedule evaluation

ARMOR Knowledge Base

The Element of SurpriseTo 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

September 28, 2007

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

Selected Sites in California

Chemical: High fatality potential

Commercial: high threat

Dams: Fatality & economic impact potential

“Only” Five Inputs Required per Site

1. Threat: Probability of Attack (P)

2. Vulnerability: Probability Attack Succeeds (Q)

3. Consequences: Expected Loss if Attack Succeeds (L)[$-equivalent losses]

4. Loss Reduction: Loss Reduction with RMP (0 < R < 1)

5. Cost: Cost of Risk Reduction (C)

Expected loss: No RMP: EL = P∙Q∙LWith RMP: EL´ = P∙Q∙L∙(1-R) + C

Net loss reduction: (EL - EL´) = P∙Q∙L∙R – C

Three Sectors Appeared to Be Higher RiskSector Comparisons (CREATE)

Fatality Range

Economic

Impacts

Threat and

Vulnerability

Risk

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

Consequence Analysis for Dams

Sector Prioritizations: Dams

FacilityStorage Capacity Inundation Area Population Jobs

Dam 6 3,964,960 1872 sq-mi 175,000 48,743

Dam 1 3,540,000 1341 sq-mi 138,055 52,125

Dam 2 2,420,000 1161 sq-mi 570,055 210,442

Dam 8 2,030,000

Dam 3 1,961,320 925 sq-mi 370,582 136,799

Dam 9 1,030,000

Dam 10 969,600

Dam 4 894,000 188 sq-mi 448,000 110,132

Dam 12 651,000 Arizona low low

Dam 7 221,600 Catastrophic fatalities

Dam 14 170,000

Dam 5 41,110 Catastrophic fatalities

Dam 13 28,640

Dam 11 20,790 Mission critical

Not selectedSelected

Consequence Analysis for Chemical Plants

Calpine PittsburgDelta Energy CenterHasa Inc.- Pittsburg

Pittsburg Power Plant

Wilbur West Power Plant

Nichols Road Power Plant

Los Medanos Energy Center

Praxair Distribution, Inc.

Loveridge Road Power Plant

Tesoro Golden Eagle Refinery

Antioch Water Treatment Plant

Air Products, Martinez-Tesoro

Pittsburg Water Treatment Plant

Polychemie Inc. - Pittsburg, CA

Ralph D. Bollman Water Treatment Plant

Criterion Catalysts and Technologies L.P.

Concord

Antioch

Pittsburg

Alamo

Walnut Creek

Bay Point

Pleasant Hill

Lafayette

Clayton

Martinez

Benicia

Moraga

Vine Hill

Waldon

Pacheco

§̈¦680UV24

UV242

UV24

Gate

Clayton

Treat

Leland

Bailey

Mai

n

Marsh Creek

A

Concord

L

Ta

ylo

r Ygnacio Vall ey

Solano

Buchanan

Cowell

Will

ow P

ass

18th

Port Chicago

Kirker

Pass

14th

Pacheco

Rai

lroad

Har

bor

Oak Grove

Waterfront

M orello

3rd

Geary

Lone Tre e

Olympic

Boyd

4th

Walnut

Somersv

ille

Danville

Monument

Civic

Olivera

E mpire M ine

Contra C

osta

Livorna

James Donlon

Rudgear

Oak Park

Oak

East

Alhambra

Chilpancingo

Arnold Industrial

Grayson

Meadow

Bancroft

Bab

el Denkin

ger

Stoneman

Grant

Donlan

Mes

a R

idge

Concord

Willow Pass

Waterfront

Contra Costa

Solano

Sacramento

Mount Diablo State ParkMount Diablo State Park

Us Naval Weapons Sta ConcordUs Naval Weapons Sta Concord

Us Naval Station Port ChicagoUs Naval Station Port Chicago

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

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

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