Counting the Cost of Terror

First, everything stopped. We gaped at the television. We held our breath. Then, inevitably, the world began to turn again, revealing a landscape cruelly remade.

The US and the world were permanently changed by the events of September 11, 2001. No one knows the final outcome, but we knew in that awful instant that we were indeed living in a different world.

It's now almost a year months since that terrible day. How does this new world look - especially in critical areas such as globalisation, security, supply chain and spending? Moreover, what is the resultant economic fallout?

Something profound and far-reaching began happening to business as a horrified world watched terror rain down on Manhattan and Washington on September 11. It is happening still.

The shock waves generated by the tectonic attacks on the World Trade Centre and the Pentagon are still spreading. Analysts are struggling to assess the true impact on nation-states, business, the world of finance and the economy. No one has yet developed a ready reckoner for the cost of terror, or of badly rattled consumer and business confidence.

It became commonplace post September 11 to assert that the world would never be the same again. Seven months after the attack it may seem more like a reversion to business as usual, but below the radar many see significant shifts in business habits and practices whose full ramifications are yet to be felt. As the US ramps up its "war on terrorism" and works assiduously to lock in the rest of the so-called free world, the business world is facing up to the aftershocks of the attacks that rocked America, and the realities of a US seemingly prepared to assume a permanent war footing.uddenly our world seems a much less predictable place. Austrade chief economist Tim Harcourt says American society is feeling a little less secure and impenetrable now. The psychological impact on friends and families of victims and survivors is immeasurable, he says. And the impacts are being echoed around the world.

As a direct result of the attacks, the American nation has become more insular, its people more angry and afraid. Heightened security is certain to have cascade effects on the way business operates here in Australia and elsewhere. An increasingly risk-averse business community is re-examining relationships with partners at all levels. Supply chains are being pared to a minimum. The US government shows signs of being even more torn between unilateralist tendencies and a grudging recognition that security ultimately depends on international cooperation. And the chances of global peace have never seemed more remote, as the US war on terrorism gathers steam.

Australia is involved. Armed forces have been committed. And high-profile Australian and other global brand companies have already experienced threats to their operations in some parts of Asia," Gartner senior vice-president of business development and research Asia Pacific, Bob Hayward, told the Gartner Symposium/ITxpo 2001 in November.

"Obviously, if you are a US company, especially a high-profile US company, the risks to your business interests and operations are more significant; but no one can assume they are immune," Hayward said. "If you deal with America in your business, or with American companies, then you will be impacted. If you rely in any way on US imports or exports you will be impacted. If your suppliers and clients have significant US interests, then you are impacted."

War economies inevitably impact on business in unpredictable ways, and this war economy is likely to be different from any ever known before. Meanwhile, as well as some major attitudinal changes, many analysts believe the business environment - not to mention business psychology - technology and culture have all been turned upside down by the terrorist attacks. And the ramifications are likely to be as wide as they are deep, with corporations also adopting new behaviours in the face of their fears.

Leadership Wanted

The events of September 11 were a wake-up call about the growing need for a new world view - a system of global leadership. And multinational organisations are in the most powerful position to champion this leadership change, says Dr Robert Burke, managing director of the Futureware Corporation and principal of the Australasian Centre for Leadership and Innovative Management.

Burke says that now, and in the future, the four factors of globalism, multiculturalism, the Internet and politicisation will be the key drivers for change.

"Because of these drivers, we are rapidly moving from an information age into a knowledge age. As technology growth increases faster than social learning, knowledge technologists will become an essential group in the workforce. These knowledge workers will be dominant both socially and politically and they will be borderless. These changes will create a blurring of nationalism, and internationalism will develop.

"As the tyranny of distance is eroded, so too will the artificial geographical boundaries surrounding countries erode. By accepting and championing this change, governments and organisations are in the most powerful position to ensure that this necessary leadership change will become sustainable and successful."

Fear of Flying

Less and less of face-to-face

John DiFrances, an international business adviser to senior executives and professional speaker, says he has been amazed at the degree of impact the terrorist attacks had upon corporate America, especially the large corporations. A widespread sense of fear and panic is influencing business decisions, he says.

"Many senior executives I speak with are afraid to fly, especially to travel internationally. Many major American corporations have become much more risk adverse since September 11, not just in regard to trade, but in every way," he says. The fear levels evidenced are unreasonable, DiFrances says, but the effects are pervasive.

"The mode of doing business has changed - we are much more cautious about when and where we travel," agrees Aether international sales manager Allan Male. "We have increased our use of video- and Web-conferencing capabilities as well.

"It's not just America's concerns - many of our Asian partners have cancelled trips to the US due to security concerns. These are global security concerns - witness the Philippines and Indonesia as cases in point."

Giga Information Group says turning a four- to eight-hour trip into an eight- to 12-hour trip, much of which is spent in limbo with the occasional break for a security body-search, will be very distasteful to people raised in the US.

"A number of companies have already adopted policies that will remain in place during the threat that will make air travel for their US employees nearly impossible. Travel overseas, for many, will likely be curtailed for an even longer period as those with US passports become aware of both their personal risk and the inability of the US government to protect them while in Europe, or in some cases, in the air," a Giga report says.

Gartner's senior vice-president of business development and research Asia Pacific, Bob Hayward, says businesses that rely on air travel to service or sell to their customers have formulated alternatives that protect revenue and profit streams. Possible "virtual" substitutes are aggressively being investigated for their viability.

"Enterprises should reduce their dependence on travel and face-to-face meetings. They should evaluate e-mail, telecommuting, instant messaging and groupware. Resistance to travel by personnel and distribution of critical operations will also lead to an increase in videoconferences and audioconferences," he says.

Austrade's executive general manager for the Middle East and Indian Ocean region, Roger Bayliss, agrees. Virtually all countries - particularly the US and Japan - have cut business travel to the Middle East, he says. That reluctance to fly is presenting real opportunities for bold and aggressive Australian businesses.

"This is an area of advantage and a vacuum that we can, and are, and should be attacking very aggressively," Bayliss says.

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