The Department of Homeland Security's Risk Assessment Methodology: Evolution, Issues, and Options for Congress

The Department of Homeland Security’s Risk
Assessment Methodology: Evolution, Issues, and
Options for Congress
February 2, 2007
Todd Masse
Specialist in Domestic Intelligence and Counterterrorism
Domestic Social Policy Division
Siobhan O’Neil
Analyst in Domestic Security and Intelligence
Domestic Social Policy Division
John Rollins
Specialist in Terrorism and International Crime
Foreign Affairs, Defense, and Trade Division

The Department of Homeland Security’s Risk
Assessment Methodology: Evolution, Issues, and
Options for Congress
As early as his Senate confirmation hearing, Department of Homeland Security
(DHS) Secretary Michael Chertoff advocated a risk-based approach to homeland
security. Secretary Chertoff has stated “DHS must base its work on priorities driven
by risk” and, increasingly, risk assessment and subsequent risk mitigation have
influenced all of the department’s efforts intended to enhance our nation’s ability to
prevent, respond to, and recover from future terrorist attacks and natural disasters.
While the practice of risk analysis may be advanced in the insurance and financial
industries, it is relatively less developed in the homeland security field. Although
there are numerous reasons that account for this dynamic, two primary reasons
include (1) the dynamic nature of terrorism and ability of terrorists to adapt to
successful countermeasures, and (2) the lack of a rich historical database of terrorist
attacks, which necessitates a reliance on intelligence and terrorist experts for
probabilistic assessments of types of terrorist attacks against critical assets and/or
regions. This report begins with an overview of the evolution of risk assessment
methodologies from the Department of Justice in FY2002 to DHS in FY2007, and
then discusses the discipline of risk management and risk assessment as applied to
Homeland Security Grant Program (HSGP).
Terrorism risk analysis and assessment do not exist in a vacuum. Risk is
analyzed and assessed as a means to mitigate or “buy down” risk over time by
developing certain capabilities across the country. At DHS, the State Homeland
Security Grant Program is the primary tool the agency has to influence the behavior
of State and local partners to take actions that reduce what both parties agree are the
risks of a terrorist attack and to respond effectively to such an attack, or other
catastrophe. Regardless of the complexity of the risk assessment methodology, due
to the inherent uncertainties associated with assessing risk in a dynamic
counterterrorism context, some level of flexibility in managing risk may be
necessary. Empirical data on historical terrorist attacks in the United States may,
therefore, continue to play an important role in resource allocation to reduce risk.
This report presents several risk assessment and related grant program options
for congressional consideration: (1) maintain the status quo in the inextricably linked
areas of risk assessment and grant allocation, (2) draft a national impact assessment
to understand return on investment of the approximately $12 billion of HSGP spent
by FY2008, (3) enhance the transparency of the risk allocation methodology to state
and local governments, and (4) develop a comprehensive and long-term strategy for
managing, assessing and mitigating risk. To achieve these goals, the department
could opt to consider procedural or organizational changes. Possible approaches are
discussed in the report’s final section. This report may be updated.

In troduction ......................................................1
Background ......................................................2
Evolution of the DHS Risk Assessment Methodology.................3
Risk Assessment-Related Legislative Activity.......................5
Risk Assessment: Stages of Development
Stage I: R=P..............................................5
Stage II: R=T+CI+PD......................................5
Stage III: R=T*V*C=T*(V&C)...............................6
The Current Process............................................6
FY2007 .................................................6
The Current State..........................................9
Transparency .........................................9
Risk Formula Evolution.................................9
Guaranteed Minimums..................................9
Responsibility for Reducing Risk and Federal Grant Levels....10
Risk Assessment and Resource Allocation — Macro Questions........12
Risk Management and Assessment: Complex Activities..............15
Risk Assessment: Some Critical Drivers and Perspectives.............19
Possible Approaches for Congress....................................23
Maintaining Status Quo....................................23
National Impact Assessment................................24
Further Enhance Transparency..............................24
Development of a Risk Strategy Both Within DHS and
Throughout All Government Agencies....................25
Appointment of a DHS Risk Assessment Manager (RAM)........26
Creation of a DHS Risk Advisory Board (RAB).................26
Creation of a Permanent Risk Assessment Center (RAC)..........26
Implement 9/11 Commission Recommendation.................27
Treat Terrorism Prevention Grants Uniquely...................27
Appendix. Legislative Activity on DHS Risk Formula for Grants...........29
List of Figures
Figure 1. Tracking Time Line........................................3
Figure 2. FY2007 Risk Formula......................................8
Figure 3. Asset-Based Risk Analysis Attributes.........................21
Figure 4. State Geographic Risk Analysis Attributes.....................21
List of Tables
Table 1. Evolution of DHS Grant and Risk Assessment Formula............11

The Department of Homeland Security’s
Risk Assessment Methodology: Evolution,
Issues, and Options for Congress
As early as his Senate confirmation hearing, Homeland Security Secretary
Michael Chertoff advocated a risk-based approach to homeland security. Under
Secretary Chertoff’s direction, the use of risk assessment has become pervasive
throughout DHS. Increasingly, risk assessment and subsequent risk mitigation efforts
influence many aspects of the department’s work intended to enhance our nation’s
ability to prevent, respond to, and recover from future terrorist attacks and natural
disasters. Indeed, Secretary Chertoff has stated “DHS must base its work on priorities
driven by risk.”1
The purpose of this report is to analyze how DHS assesses risk.2 In the absence
of sound risk assessment methods, the prioritization of homeland security activities
at the federal, state, and local level is problematic. If DHS is to “prevent terrorist
attacks within the United States,”3 one of its primary statutory missions, it needs to
assess risk in an accurate manner. However, risk assessment does not occur in a
vacuum; the end goal is to reduce and mitigate risk. All of DHS’s employees work
to reduce risk, respond to a terrorist attack or natural disaster should one occur,
and/or protect the country by preventing dangerous materials or individuals from
crossing U.S. borders. The primary tool DHS has to “buy down” or minimize risk
and to influence the behavior of State and local public safety and law enforcement
officials who collectively represent substantial “force multipliers” is the Homeland
Security Grant Program. Others have written extensively about DHS grant programs
and the allocation of such programs across the country.4

1 U.S. Department of Homeland Security, “Homeland Security Secretary Michael Chertoff
Announces Six-Point Agenda for Department of Homeland Security,” Press Release, July

13, 2005, Office of the Press Secretary, available at [

press_release_0703.shtm], accessed Jan. 26, 2007.
2 DHS is primarily concerned with assessment of terrorism risk. As a result, a terrorism risk
assessment model is currently being used by the department to allocate resources for
purposes which include, but also go beyond terrorism prevention, such as preparation and
response to natural disasters.
3 See P.L. 107-296, Sec 101, codified at 6 U.S.C. §111.
4 A non-exhaustive list of these reports and articles includes CRS Report RL33583,
Homeland Security Grants, Evolution of Program Guidance and Grant Allocation Methods,
Aug. 7, 2006, by Shawn Reese; CRS Report RL33241, FY2006 Homeland Security Grant

The purpose of this report is not to re-construct grant program research, but to
examine the concept of DHS risk assessment itself and how the evolution of risk
assessment flows through the DHS grant programs. The report has three sections (1)
the evolution of risk assessment from the Department of Justice in FY2002 to DHS
in FY2007, (2) fundamental questions about risk analysis as applied to homeland
security, and (3) possible options for Congress. It will examine strategic questions
about risk, and how risk is defined and distinguishable from other terms, such as
vulnerability. Finally, the report will discuss a possible range of approaches for
Congress with respect to DHS risk assessment practices, DHS’s organization to
assess risk, and the implementation of risk mitigation efforts using the DHS grant
Given the focus of this report, an analysis of the DHS’s risk assessment
methodology through the lens of the homeland security grant process, some
background information on the grant process is necessary. As previously stated, the
risk assessment process cannot be examined in isolation. Rather, the context of the
homeland security grant program is discussed to illuminate the homeland security
risk assessment methodology and its implementation throughout various homeland
security initiatives. This report may be updated.
In FY2004, the allocation of homeland security grant monies inspired debate in
states across the country. One often-reported anecdote noted that Wyoming’s
FY2004 State Homeland Security Grant Program (SHSG) award was $14,360,000,
while New York and California received $78,827,000 and $133,964,000,5
respectively. On its face, it seemed intuitive that New York and California would
receive more money than Wyoming. But when examined in light of 2004 census
bureau estimates, it appears that Wyoming received approximately $28.34 in SHSG
funding per capita while New York and California received $4.10 and $3.73 per6
capita, respectively. The rationale behind the disbursement of funds seemed
counterintuitive to many, especially given the recent attacks and continued plots
against locations in New York and California, to include the 1993 World Trade
Center Bombing, the 1994 Blind Sheikh plot, the Millennium plot against Los

4 (...continued)
Distribution Formulas: Issues for the 109th Congress, Jan. 20, 2006, by Shawn Reese; The
Heritage Foundation, DHS 2.0: Rethinking the Department of Homeland Security, Dec. 13,
2004, by James J. Carafano and David Heyman; Michael E. O’Hanlon et. al, The Brookings
Institution, Protecting the Homeland 2006/2007; Michael E. O’Hanlon, “Homeland Security
Funding: Urban Area Grant Maze,” Washington Times, June 29, 2006; Council on Foreign
Relations, Backgrounder: Risk-Based Homeland Security Spending, Feb. 8, 2006, by Eben
5 Department of Homeland Security, “FY2004 Homeland Security Grant Program,”
Department of Homeland Security Office of Grants and Training website, available at
[], accessed on Dec.1, 2006, p. 7.
6 Comparison made using Department of Homeland Security’s “FY 2004 Homeland Security
Grant Program,” and 2004 US population estimates from US census data.

Angeles International Airport (LAX), and the September 11th attacks, amongst others.
Numerous interested stakeholders at all levels of government sought to learn more
about the homeland security grant allocation methodology and process.
Figure 1 below provides a time line to track major milestone events in the
evolution of risk assessment in a homeland security context.
Figure 1. Tracking Time Line

Source: CRS presentation of significant events and current law.
Risk experts appear to agree that all communities have some level of risk from
terrorism. Yet, homeland security officials acknowledge that it is impossible to
protect every target and harden every community to the extent that they become
impervious to future attacks. It seems clear that it is necessary, from a national
perspective, to identify the areas and entities across the country most at risk and to
work to reduce that risk. What is less clear is the best way to evaluate relative
homeland security risk, and establish an acceptable level of risk while attempting to
close the most dramatic gaps between risk and capabilities. What follows is a
chronological overview of the DHS risk assessment methodology examined through
the prism of the Homeland Security Grant Program.
Evolution of the DHS Risk Assessment Methodology
The federal government’s approach to distributing funds to State/local
governments to enhance the latter’s ability to prepare for and respond to terrorist acts
has evolved in the last six years. It is important to understand the genesis of this grant
program and the reactions to each stage of its development in order to better
comprehend the current methodology. The evolution of the grant program and the
risk methodologies it employs has occurred against the backdrop of the
transformation of the nation’s understanding of ‘homeland security’ itself. Borne out
of the September 11 attacks, the term ‘homeland security’ and the department
designed to enhance it, were initially solely terrorism-focused. With time, and other
catastrophic incidents, the focus of the department expanded to include a range of

potentially destabilizing, non-terrorism threats, such as natural disasters. This
evolution in mission has significant ramifications for the calculation of the threat
aspect of the risk formulas utilized to allocate some of the homeland security grant
funds, as will become evident in the following section’s overview of grant allocation
and related risk methodologies.
Over the years, there have been numerous criticisms from various groups7 over
how risk is assessed and, as a result, DHS grants are allocated. Following the
FY2004 homeland security grant allocation process, the 9/11 Commission (hereafter
Commission) weighed in on the funding controversy when it issued the following
recommendation in its final report, published in late July 2004:
Homeland security assistance should be based strictly on an assessment of risks
and vulnerabilities. Now, in 2004, Washington, D.C., and New York City are
certainly at the top of any such list. We understand the contention that every state
and city needs to have some minimum infrastructure for emergency response.
But federal homeland security assistance should not remain a program for
general revenue sharing. It should supplement state and local resources based on
the risks or vulnerabilities that merit additional support. Congress should not use8
this money as a pork barrel.
The Commission report asks a second question: “Can useful criteria to measure risk
and vulnerability be developed that assess all the many variables?”9 The
Commission lists a variety of factors that should be considered in the assessment of
“threats and vulnerabilities” to include “population, population density, vulnerability,
and the presence of critical infrastructure within each state.”10 The Commission
suggests that the federal government should then require each State that receives such
funds to provide an “analysis based on the same criteria to justify the distribution of

7 For the past several grant cycles, many States and local leaders have expressed frustration
and disappointment with DHS’s risk assessment process and the related distribution of grant
funds. Much of the disappointment with respect to FY2006 grants was the result of the first
post-9/11 decline in funds provided to state and local communities. For FY2006, the total
amount allocated for homeland security grants was $1.7 billion, (DHS, “DHS Announces
$1.7 Billion in Homeland Security Grants: Grants will build States’ and Urban Areas’
Preparedness,” May 31, 2006) a significant decrease from $2.5 billion in FY2005 (DHS,
“Homeland Security Grants FY2005,” Updated December 3, 2004, Office of Grants and
Training). Another source of frustration was a perceived lack of transparency regarding the
risk assessment process, especially with regard to the sources of information used and the
weighting of the formula’s variables and underlying data sub-elements. Furthermore, the
continued shift towards a risk-based approach may have caused consternation amongst some
jurisdictions due to the inference that future grant funding may be threatened. Spurred on
by congressional pressure, the department has continued to move toward a methodology that
is more heavily risk-based.
8 National Commission of Terrorist Attacks Upon the United States, The 9/11 Commission
Report: Final Report of the National Commission of Terrorist Attacks Upon the United
States, Authorized Edition (New York: WW Norton and Company, 2004), p. 396.
9 Ibid.
10 Ibid.

funds [with]in that State.”11 The Commission understood that the “benchmarks”
chosen to evaluate a site’s threat and vulnerability “...will be imperfect and
subjective; [but] they will continually evolve.”12
Given the criticisms associated with the DHS risk assessment methods, a look
at congressional interest in risk assessment as it relates to the homeland security grant
programs may be instructive.
Risk Assessment-Related Legislative Activity13
Concurrent with the Commission’s critique and internal efforts within DHS to
move to a more risk-based approach, Members of Congress put forth a series of bills
and amendments to the Homeland Security Act that sought to reform the criteria for
distributing homeland security grant funds. Each effort sought to remedy the
perceived issues associated with the homeland security risk assessment process.
Some suggested the creation of new oversight or coordination bodies. Most
importantly, for purposes of this report, each bill and amendment proposed changes
to reduce guaranteed allotments and enhance the percentage of funding allocated
based on risk. To varying detail, each legislative initiative suggested definitions or
approaches to evaluate risk with regards to homeland security. The Appendix
provides additional information on the legislative initiatives referenced in this
Understanding the criticisms of the DHS risk assessment process and the
proposed congressional remedies, an analysis of how the various stages of risk
assessment have evolved over time may be useful.
Risk Assessment: Stages of Development
There have been at least three stages in the evolution of risk assessment
methodology as it pertains to homeland security. These stages and unique
developments within each era are summarized below.
Stage I: R=P. This period covers from FY2001, when the Department of
Justice (DOJ) had primary responsibility for assessing risk, to FY2002-FY2003,
when this responsibility was transferred to DHS. This first stage of risk assessment
could be characterized as early stage developmental. During this period, risk was
generally assessed and measured according to population numbers. In short, risk (R)
was equated to population (P).

11 Ibid.
12 Ibid.
13 The intent of this section and the appendix is to provide a snapshot of recent historical and
current legislative activity with respect to risk assessment. This section is not provided with
intent to track this legislation over time and, as such, will not be continually updated.

Stage II: R=T+CI+PD. This period covers from FY2004 to FY2005. During
this period, the importance of critical infrastructure, population density14 and a
number of other variables was included in the assessment of risk. However, the
formula for risk remained additive and “risk-like,” as probabilities were not an
essential element of the risk assessment process. Risk was assessed as the sum of
threat (T), critical infrastructure (CI), and population density (PD).
Stage III: R=T*V*C=T*(V&C). This period covers from FY2006 to today,
a time when probability of particular events was systematically introduced into the
formula. As will be discussed more in-depth below, FY2006 also marked another
important departure from the previous risk assessment methodology: For the first
time, when calculating risk, DHS chose to examine both risk to assets and geographic
areas. With the swearing in of Michael Chertoff as Secretary of the DHS in February

2005, the department underwent both organizational and strategy-related changes.

Concurrent with DHS’s reorganization, Secretary Chertoff announced that a new
risk-based methodology would dictate department al activities and all future federal
funds would be distributed accordingly.15 This new approach to allocating the
remaining funds required an assessment of risk using a formula that considers the
threat to a target/area, multiplied by vulnerability (V) of the target/area, multiplied
by consequence (C) of an attack on that target/area. As a result, the risk assessment
formula became R=T*V*C. Variables were no longer additive, but were multiplied,
implying weighting of variables and some assessment of the likelihood that certain
events would occur.
The Current Process
FY2007. The FY2007 Homeland Security Grant Guidance describes the DHS
approach to risk assessment as:
Risk will be evaluated at the Federal level using a risk analysis model developed
by DHS in conjunction with other Federal entities. Risk is defined as the product
of three principal variables:
!Threat (T) — the likelihood of an attack occurring

14 It should be noted that population density numbers can be misleading. Cities define
geographic boundaries differently which may lead to municipalities with similar populations
having very different density ratios. While population density is often a good indicator of
individuals that may be affected by a terrorist attack, such a criteria may not be useful for
cities where the citizens are located far away from the center of the municipality.
15 Secretary Michael Chertoff U.S. Department of Homeland Security Second Stage Review
Remarks, July 13, 2005, available at [
.shtm], accessed Jan. 26, 2007. “We must make tough choices about how to invest finite
human and financial capital to attain the optimal state of preparedness. To do this we will
focus preparedness on objective measures of risk and performance. Our risk analysis is
based on these three variables: threat, vulnerability, and consequences. These variables are
not equal. For example, some infrastructure is quite vulnerable, but the consequences of an
attack are relatively small; other infrastructure may be much less vulnerable, but the
consequences of a successful attack are very high, even catastrophic.”

!Vulnerability and Consequence (V&C) — the relative
exposure and expected impact of an attack 16
Although DHS continues to discuss its risk methodology in terms of the R=T*V*C
formula, it appears as if the department is treating vulnerability (V) and consequence
(C) as an amalgamated, single variable as depicted in Figure 2. As mentioned above,
due to difficulties associated with differentiating vulnerability values across areas and
states, according to DHS it has, in effect, assigned a value of one to vulnerability.
As a result, while three variables may formally remain in the formula, in effect only
two exist for FY2007. In addition, significant changes to the underlying elements of
each variable were made for the FY2007 process.17
While the FY2007 HSGP Guidance18 does not provide additional detail as to the
specifics of the risk methodology, a separate document, the FY2007 DHS Grant
Programs Overview, accompanying the Guidance sent to state homeland security
leaders does provide greater transparency into how risk is assessed. In the FY2007
DHS Grant Programs Overview, the weighting of each variable is provided and
includes a description of the underlying data-sets supporting the calculation for each
variable. As demonstrated in Figure 2 the vulnerability19 and consequence variables
of the risk methodology now include the sub-elements of population index
(comprising 40% of the risk methodology), a national infrastructure index (15%), an
economic index (20%), and a nation security index (5%).

16 U.S. Department of Homeland Security, “FY2007 Homeland Security Grant Program:
Program Guidance and Application Kit,” Office of Grants and Training website, available
at[], p.8, accessed Jan. 29,


17 Though not the focus of the report, it is important to demonstrate how the evolution of the
risk methodology has supported the significant changes included in the FY2007 Guidance.
Two significant changes are contained in the FY2007 Guidance directly related to DHS’s
risk methodology evolution: the dividing of the Urban Area Security Initiative jurisdictions
into two tiers with the six municipalities in tier one receiving 55% of the total allocation and
the department’s establishment of a pilot program to allow the six highest risk UASI cities
authorized to use up to 25% of the awarded funds to support the personnel costs associated
with counterterrorism operations.
18 U.S. Department of Homeland Security, FY2007 Homeland Security Grant Program,
Program Guidance and Application Kit, Office of Grants and Training website, available
at [], accessed Jan. 29, 2007.
19 As mentioned above, for FY2007, vulnerability has been assigned a value of one. In
effect, then, consequence is weighted at 80%.

Figure 2. FY2007 Risk Formula

Source: CRS presentation of DHS FY2007 Risk Formula.
In FY2007, DHS’s manner for determining threat (20% of the risk
methodology) underwent a significant change in how intelligence and investigative
information was analyzed. DHS’s Office of Intelligence and Analysis for the first
time undertook an historical analysis of threats to the representative UASI cities that
spanned from the attacks of September 11, 2001, to the release of the FY2007
Homeland Security Grant Guidance. Prior to FY2007, in supporting the Homeland
Security Grant effort, DHS evaluated threats to cities for the preceding year only and
did not consider historical threat trends. For FY2007, DHS also initiated an effort
whereby the cities deemed most at risk were placed in four tiers based on assessed
level of threat.
It should be noted that DHS’s efforts to evaluate and analyze threats only
consider federal government intelligence and investigative information. To date,
State and local intelligence and investigative information are not systematically
considered in DHS’s assessment of threats to a given locality. It could be argued that
the establishment of the State and local fusion centers may assist in ensuring relevant

State and local threat information20 is considered in future federal government risk
analysis efforts.
The Current State. The evolution of the DHS risk assessment process and
formula, as summarized in Table 1, continues to spark additional questions and some
concerns in the following areas: the transparency of the risk assessment process; the
implications of an evolving risk formula; minimum grant allotments; and the
responsibility for buying down risk.
Transparency. The additional information provided by the department in
FY2007 should allow applicants of DHS grant funds to have a better understanding
of the types of information contained in the underlying data-sets and how each is
assessed and weighted during the risk assessment process. While this transparency
in the methodology may satisfy some grant process critics, others remain concerned
with the formula’s effectiveness in meeting the needs of those most at risk.21
Risk Formula Evolution. With the adoption of R=T*V*C, many see
FY2006 as the first significant change to DHS’s risk assessment methodology. Some
observers could express concern that continued changes to the methodology will not
allow the United States to establish a baseline of risks to the nation, thus jeopardizing
any attempts to spot current trends or forecast future security concerns. Others might
view the changes to the methodology as steps toward improving the risk assessment
process and suggest that as DHS’s understanding of risk evolves and its access to
data increases, the associated methodology will stabilize and provide a sound
foundation from which to make analytic and grant decisions.
Guaranteed Minimums. Some homeland security observers suggest that
future congressional or executive branch changes to DHS’s risk-based formula

20 It has recently been reported that “...homeland security officials are opposed to letting
representatives of State and local governments serve on...,” the Interagency Threat
Assessment Coordination Group (ITACG). See Siobhan Gorman, “Out of the Loop on
Terror Threats: Homeland Security Excludes, State, Local Officials from Group that Shares
Data,” Baltimore Sun, Feb. 2, 2007. The ITACG was recommended in the Information
Sharing Environment (ISE) Implementation Plan, published in Nov. 2006, by the Program
Manager of the Information Sharing Environment, a group located within the Office of the
Director of National Intelligence. According to the ISE Implementation Plan (p.29), “...A
primary purpose of the ITACG will be to ensure that classified and unclassified intelligence
produced by Federal fused, validated, deconflicted, and approved for
dissemination in a concise and, where appropriate, unclassified format.” It was reported that
DHS officials stated that the department has “...always sought ways to incorporate State and
local officials by assigning them to offices within the Department, such as its intelligence
office and its operations center.” Homeland security officials reportedly stated that the
presence of State and local officials at the ITACG would create “...unnecessary confusion
at a unit whose main role is merely to package information.”
21 According to New York City Mayor Michael Bloomberg, “The freedoms and
opportunities that New York symbolizes mean that we remain a prime - if not the prime -
target for al-Qaeda and other terrorist groups.... Yet, time and time again our appeals for
fully risk-based funding have been ignored.” Testimony before the Senate Homeland
Security and Governmental Affairs Committee, Jan. 9, 2007.

should include the elimination of the disbursement of guaranteed funding minimums
to all states and municipalities.22 Noting that HSGP grants “enhance States,
territories, and Urban Areas ability to prevent, protect against, respond to, and
recover from terrorist attacks, major disasters, and other emergencies,”23 others may
argue that the continuation of a minimal level of funds to all states might be
beneficial in shoring up vulnerabilities or buying equipment that can equally respond
to man-made and natural threats to a jurisdiction, citizens, property, or government
functions. Other commentators may maintain that disbursing a significant portion of
the funds without regard to the risk level of a given locality will continue to impair
the prevention, preparedness, and response capabilities of those cities deemed highest
at risk.
Responsibility for Reducing Risk and Federal Grant Levels. Since
its inception, DHS’s risk-based formula for distributing funds to state and local
communities has been a source of frustration for members of the federal, state, and
local governments24 and those who assess post-9/11 counterterrorism program25
implementation efforts. Some homeland security observers suggest that it is
unrealistic to expect grant levels to continue to increase as U.S. budget concerns
weigh on future appropriations. Others might note that as at-risk jurisdictions
continue to shore up previously known vulnerabilities they will require less federal
funding due to a lowering of their risk profile.
Table 1 below provides a cursory overview of the evolution of the DHS grant
and risk assessment formula from FY2001 through FY2007.

22 Ibid.
23 Homeland Security Grant Program, Department of Homeland Security. Available at
[], accessed
Jan. 26, 2007.
24 “Mayors, lawmakers press for more urban security funds,” Government Executive, June
21, 2006, available at [
=rellink], accessed Jan. 26, 2007.
25 National Commission on Terrorism Attacks Upon the United States (9/11 Commission),
Recommendation 12.4 Protect Against and prepare for terrorist Attacks, p. 396. Available
at [], accessed Jan. 26, 2007.

Table 1. Evolution of DHS Grant and Risk Assessment Formula
Agency - PeriodFunding Proportion & Related Risk Assessment Formulas
DOJ - Pre-9/11Risk Allocation - Risk (R) = Population (P) (Defense Against Weapons of Mass
Destruction Act of 1996, P.L. 104-201).
DOJ - Post-9/11Funding Proportion - (USA PATRIOT Act of 2001, P.L. 107-56) 40% Statutorily
Mandated (.75% per state, Puerto Rico and Wash., D.C. + .25% per U.S. territory).
The remaining 60% allocated by Risk - the assessment of which is statutorily
unspecified. R=P. Funding formula, not to be confused with risk assessment formula
used to determine the aforementioned 60% of the homeland security grants.
DOJ/DHS - 40% Statutorily Mandated60% allocated by Risk
FY2002 &FY2003R = P
DHS - FY200440% Statutorily Mandated60% allocated by Riska
Weighting of DHSThreat (T) = Intelligence Community credible threats & FBI/ICE Field Investigations
- FY2004 Risk(weighted 3)
Formula Critical Infrastructure(CI) = (weighted 6)b
Population (P) = population/population density (weighted 9)
DHS - FY200540% Statutorily Mandated60% allocated by Riskc
R = T+V
Weighting of DHSThreat (T) = Intelligence Community credible threats (2) & FBI/ICE Field
- FY2005 RiskInvestigations (2) (weighted 4)
Formula Critical Infrastructure(CI) = (weighted 6)
Population (P) = population/population density (weighted 9)
*Additional factor = Mutual Aid Agreements (weighted 1)
DHS - FY200640% Statutorily Mandated60% allocated by Risk
R = T*V*C. First year in which
probability was systematically
included in risk assessment.
Weighting of DHSRisk is calculated for both geographic areas and assets. While both calculations
- FY2006 Riskinclude T, V, and C factors, they have distinct subcategories.
Threat (T) - (IC reports, FBI investigations, ICE investigations, suspicious incidents,
I-94 visitors from countries of interest, total # of visitors from such countries with
state as destination)
Vulnerability (V) - (total # international visitors, miles of international border, miles
of designated WIPP route)
Consequence (C)
- (human health, economic, strategic mission, and psychological - as well as
numerous subsets of each)

A sse t
Threat (T) (strategic intent, ‘chatter, attractiveness of target, capabilities)
Vulnerability (V) (value assigned by DHS)
Consequence (C) (human health, economic, strategic mission, and psychological)
It is not clear how each factor and sub-factor were weighted.
DHS - FY200740% Statutorily Mandated60% allocated by Riske

R = T*(V&C)

Agency - PeriodFunding Proportion & Related Risk Assessment Formulas
Weighting of DHSThreat (T) = detainee reporting, on-going plot lines, Intelligence Community credible
- FY2007 Riskthreats & FBI/ICE field investigations (weighted 20%)
Formula Vulnerability (V) & Consequence (C) = (weighted 80% - the sum of the following
Population Index - total population (nighttime, commuter, visitor, and military
dependent) and population density - constrained to 50% impact (weighted 40%)
Economic Index (gross metropolitan product for UASI or %GDP for states (weighted
National Infrastructure Index (# Tier 1 Assets (X3) = # Tier II Assets) (weighted
National Security Index (presence of military bases + # of defense industrial basef
sites + international border crossings) (weighted 5%)
Source: CRS presentation of DOJ and DHS Risk Assessment Formula.
a. This was the first year DHS considered several sub-categories of data when calculating risk: current threat
estimates (T), critical infrastructure (CI) assets within an urban area, and population density (PD)-related
info r matio n.
b. The P calculation appears to have initially focused on population, but later incorporated population density
info r matio n.
c. In FY2005, DHS added four more streams of data into the risk calculation. These seven categories of information
have been represented in various forms and to various degrees in the subsequent formulas. See DHS Risk
Fiscal Year 2005 Homeland Security Grant Program: Program Guidelines and Application Kit, p.1. What
remains unclear is how the two variables (T and V) interact. Based on available information and discussions
with DHS Officials, the relationship between T and V is assumed to be additive, as DHS did not move to a
probabilistic risk formula until FY2006.
d. It is clear that both the geographic and asset-based risk assessment scores were utilized to determine the total
area/state risk score. U.S. Department of Homeland Security, “Overview of the FY2006 DHS Risk Analysis
Methodology,” 1-2. However, how those scores translated into grant allotments is uncertain.
e. According to a DHS representative, due to the difficulties associated with differentiating levels of vulnerabilities
across communities, DHS has effectively assigned a value of one to the vulnerability variable for each city
and area. As a result, while DHS continues to use the FY2006 risk assessment formula of R=T*V*C, and
state that risk is the product of three variables, in effect, the formula is R=T*C, and risk is the product of two
va r i a b l e s.
f. Risk continues to be calculated for both geographic areas and assets, but it is unclear how the aforementioned
weighting changes affect each calculation, and how the two scores are used to determine grant allocation. U.S.
DHS, “FY2007 DHS Grant Programs: Program Overview,” p. 15.
To inform the ongoing congressional debate on risk assessment as it flows
through the DHS grant program, the following section provides an assessment of
some of the policy questions associated with risk assessment in a homeland security
Risk Assessment26 and Resource Allocation —
Macro Questions
The overview of the evolution of the risk assessment methodology as it pertains
to homeland security grant allocations highlights a number of questions at the macro
level, such as how to best measure risk, that might be considered before

26 From a DHS perspective, risk assessment pertains solely to assessing the risk associated
with terrorist attacks, not necessarily natural disasters.

contemplating questions of allocation. As mentioned above, the Commission
recommended that the allocation of grants should be based on risk and (emphasis
added) vulnerability. Vulnerability is but one of three elements of risk, as defined by
DHS.27 In recent Senate testimony, former Congressman and Vice Chair of the 9/11
Commission Lee Hamilton suggested that experience serve as a guide for risk
assessment and resource allocation. Mr. Hamilton noted three elements worthy of
consideration when allocating homeland security spending: (1) historical and
empirical data on what has been attacked not only within the United States but
overseas — Washington, DC; New York City, New York; Madrid, Spain; and
London, England — all large cities; (2) Al Qaeda statements — according to Mr.
Hamilton — “...So far as we know they (Al Qaeda) continue to target symbols of
American power”; and (3) the best available intelligence.28 While this approach is
reasonable and based on sound logic, some might argue that broader questions and
a more anticipatory approach may need to be considered to arrive at some credible
and predictive value for future risk.
According to a recent RAND study, the following three questions might be
addressed by policymakers before resource allocation decisions are made:
!Should resources be allocated based on risk, risk reduction, or some
other basis?
!How can terrorism risk be estimated?
!What are the tolerable levels of risk?29
Another fundamental question in this area is “what is the risk to” and “from what
sources does the risk originate?” Is the risk to people, infrastructure, the economy,
or all of the above? Is the source of risk acts of terrorism, or the broader “all-
hazards” approach, where the interests lie in responding to “incidents of national
significance,” as defined in the National Response Plan? Does DHS, as suggested
by the department ‘s Inspector General, “need to continue refining its risk-based
approach to award first responder grants that ensure the areas and assets that
represent the greatest vulnerability to the public are as secure as possible?”30
With respect to the threat element of the risk equation, to what extent is unique
data collected by state and local officials being incorporated into the threat element
of risk? State and local law enforcement and public safety personnel provide
substantial amounts of data to DHS and other federal entities with the understanding
that the information will be used, in part, to assess threat. Yet, according to a DHS
official, the methodology for incorporating that data are under-developed and, as a

27 It should be noted that quite often the terms risk, vulnerability, consequence, and threat
are erroneously used interchangeably, as will be further discussed below.
28 “Ensuring Full Implementation of the 9/11 Commission’s Recommendations,” a hearing
of the Senate Homeland Security and Governmental Affairs Committee, Jan. 9, 2007.
29 See Henry H. Willis, Guiding Resource Allocations Based on Terrorism Risk (A RAND
Working Paper), March 2006.
30 DHS Office of Inspector General, Major Management Challenges Facing the Department
of Homeland Security, Dec. 2006, p. 8.

result, the data is not currently incorporated into threat assessment at the federal level
in any systematic and meaningful manner.31 It may be possible that the emergence
and proliferation of state, local, and regional intelligence fusion centers could become
a funnel through which such state and local data could be aggregated and provided
to the federal government in a manner that would allow it to contribute to threat
assessment, an element of the risk equation that is weighted at 20% in FY2007.
The answers to these questions can have a fundamental impact on how grants
are allocated. While the risk management process may be similar whether the source
of risk is a hurricane or a terrorist attack, arguably, the inputs provided into the risk
assessment model will be far different. DHS guidance shows that both the UASI and
LETPP Programs are largely designed to provide state and local governments with
funds to prepare and protect against as well as respond to and recover from acts of
terrorism.32 While this purpose also exists in the SHSP, it has the additional purpose
of supporting the implementation of the National Preparedness Goal. The other two
grants currently under the Homeland Security Grant Program umbrella, the
Metropolitan Medical Response System (MMRS) and the Citizen Corps Program
(CCP), are almost completely focused on preparedness for post-event response.
Consistent with a need to ensure all phases of a catastrophe are considered and
program objectives are clearly defined, the DHS Inspector General found that “the
department must incorporate sound risk management principles and methodologies
to successfully prepare for, respond to, recover from, and mitigate acts of terrorism
and natural disasters.”33 In short, while DHS’s risk assessment methodology is largely
geared toward countering terrorism, the results of the assessment, along with other
factors, such as effectiveness, are used for purposes which go beyond terrorism.
Once the fundamental questions of “risk to” and “risk from what” are answered,
it is necessary to form a methodology to measure relative risk and to draft and
implement a strategy to reduce it. To this end and from an economic efficiency
perspective, it could be argued that the optimal manner in which homeland security
grants might be allocated would be according to a comparative analysis of how
historical homeland security grants have actually reduced risk. From September 11,
2001, through FY2008, approximately $12 billion will have been provided to state
and local governments by DHS to prepare for and respond to terrorist attacks and
other disasters.34 A central question that may be asked is what has been the rate of
return, as defined by identifiable and empirical risk reductions, on this $12 billion
investment? It does not appear, however, that there is an established methodology
to engage in such analyses, nor are the data sets necessary for such analyses well-
developed. According to one DHS official, while the department is planning to
assess the impact of DHS grants on risk reduction in FY2008, it has been somewhat
constrained by resources and the absence of a methodology to conduct such an

31 Interview with DHS Official, Jan. 9, 2007.
32 DHS FY2007: Homeland Security Grant Program: Program Guidance and Application
Kit, Jan. 2007, pp. 1-2 and A1-A4.
33 Ibid., p. 8.
34 DHS, “DHS Announces $1.7 Billion in Homeland Security Grants,” press release, May

31, 2006.

assessment.35 As a result, some might argue, the next best method to allocating
resources is to assess, measure and rank relative risk. This is, in essence, the
approach currently being used by DHS.
Risk Management and Assessment: Complex Activities
The concept of risk - how to define, assess, and manage it - is relatively
complex. According to DHS, “...Risk is classically represented as the product of a
probability of a particular outcome and the results of that outcome.”36 As mentioned
above, it was not until FY2006 that DHS moved from a risk-like or additive approach
to assessing risk to one that is guided by more classically defined or probabilistic
methods of assessing risk. As will be expanded upon below, DHS differentiates
between two different, but complementary types of risk: asset-based risk and
geographic-based risk. Because DHS is assessing risk as a means to allocate
resources to buy down risk, it is imperative, according to DHS, that its risk
calculations be relative. That is, “...Because of the dynamic nature of temporal
valuations in the many elements that figure into risk, an absolute value, even if it
could be calculated, would be meaningful for a very limited time.”37 Moreover, DHS
differentiates between risk analysis and risk management. According to the Society
for Risk Analysis:
Risk analysis is broadly defined to include risk assessment, risk characterization,
risk communication, risk management, and policy relating to risk, in the context
of risks of concern to individuals, to public and private sector organizations, and

35 Interview with DHS Official, Jan. 9, 2007.
36 DHS, Directorate of Preparedness, Risk Management Division, and DHS Office of Grants
and Training, Risk Analysis for Fiscal Year 2006 Homeland Security Grants, p. 4.
37 Ibid., p. 2. For the relatively parochial purpose of allocating homeland security grant
resources, absolute risk may be of marginal utility. However, the absolute risk to a certain
critical asset or infrastructure may be highly relevant to state, local and private sector
officials. For example, risk management analyses have been conducted on the terrorist
threat to liquified natural gas (LNG) terminals in the United States. See Richard A. Clarke,
LNG Facilities in Urban Areas: A Security Risk Management Analysis for Attorney General
Patrick Lynch Rhode Island, May 2005. See also Carl Southwell, Center for Risk and
Economic Analysis of Terrorism Events, University of Southern California, An Analysis of
the Risks of a Terrorist Attack on LNG Receiving Facilities in the United States, Nov. 9,
2005. Because the risk analysis is conducted for one set of assets, Clarke, use
numerous variables including intent, capabilities, vulnerabilities, consequences and recovery
to assess security risk. These variables are, of course, relevant to assessing relative risk as
well. However, in order to assess the attractiveness of LNG terminals as a target, Clarke
uses the U.S. military - Special Operations Force’s CARVER target selection model.
CARVER stands for criticality, accessibility, recuperability, vulnerability, effect and
recognizability (See Field Manual 34-36 Special Operation Forces Intelligence and
Electronics Warfare Operation, Sept. 30, 1991). The aforementioned Rhode Island LNG
report states (p.76) that “...Since we are aware that al Qaeda has adopted much of U.S. Army
doctrine for use in its training camps, it is fair to assume the principals in the CARVER
matrix apply to their targeting.” With its highly tactical focus on specific assets and
characteristics of those assets, this model may have limited utility for the relative homeland
security risk assessments.

to society at a local, regional, national, or global level. Risk analysis seeks to
inform, not to dictate, the complex and difficult choices among possible38
measures to mitigate risks.
Risk management is a continual process or cycle in which risks are identified,
measured and evaluated; countermeasures are then designed, implemented and
monitored to see how they perform, with a continual feedback loop for decision-
maker input to improve countermeasures and consider tradeoffs between risk
acceptance and avoidance.39 Risk assessment pertains to the quantification or
measurement of identified risk and probabilistic assessment that certain risks will
manifest themselves.40 According the Government Accountability Office (GAO),
risk assessment is:
the process of qualitatively or quantitatively determining the probability of an
adverse event and the severity of its impact on an asset. It is a function of threat,
vulnerability and consequence. A risk assessment may include scenarios in
which two or more risks interact to create greater or lesser impact. A risk
assessment provides the basis for the rank ordering of risks and for establishing41
priorities for countermeasures.
The practice of risk management is well-developed within the insurance,
engineering, finance, and political risk industries. It is clear, however, that risk
management remains relatively immature in its application to the homeland security
field. Some might that argue the implementation of risk assessment and management
in the homeland security and counterterrorism fields may be more complex than in
its industrial application where the primary objective is to protect against financial
loss. Financial loss is, of course, one element of assessing and mitigating risk in a
homeland security context, but of equal if not more importance are threats to human
health and strategic national missions, among other factors. According to DHS, the
following issues must be taken into consideration in the assessment of risk in the
homeland security context:
!Historical Data. In the insurance or financial sectors, the
assessment of risk benefits from a rich and voluminous set of data
which can be mined for patterns of historical behavior. While there
are various governmental and non-governmental databases on
terrorism, these data sources are relatively less robust. As a result,

38 Society for Risk Analysis. Available at [], accessed Jan. 26, 2007.
39 This definition is derived from (1) Yacov’s definition of risk management (see Yacov V.
Haimes Risk Modeling, Assessment, and Management (2nd) (John Wiley & Sons, 2004),
p.57-58) and (2) Risk Management: Further Refinements Needed to Assess Risks and
Prioritize Protective Measures at Ports and Other Critical Infrastructure, (GAO 06-91),
Dec. 2005, p. 111.
40 See Yacov V. Haimes Risk Modeling, Assessment, and Management (2nd) (John Wiley &
Sons, 2004), p.57-58.
41 See Risk Management: Further Refinements Needed to Assess Risks and Prioritize
Protective Measures at Ports and Other Critical Infrastructure, (GAO 06-91), Dec. 2005,
p. 111.

the subjective judgment of intelligence and terrorism experts become
relatively more important in the projection of likely threat scenarios
directed against categories of assets and/or geographic areas.
!Risk “Inheritance.” Because grant candidates include states and
Urban Areas, and individual assets exist in both spaces, risk can be
“inherited” from one candidate to another. For example, the risk
score for a port will be “inherited” by the city and state in which that
port is located. As such, according to DHS, it utilizes various
mathematical techniques, including weighting, normalization and
order of computation to control for such unique factors.42
There are numerous other complicating factors associated with assessing risk
in the homeland security context.43 Notwithstanding a common framework for
assessing risk at an aggregate level, one of the central problems is that risks need to
be defined at a micro level — for example, the risk to a certain asset or geographic
area, given terrorist capabilities and intentions — to be very useful.44 At least with
respect to assessing risk from terrorism, the nature of the risk is dynamic, as terrorists
continually monitor successful countermeasures and adapt their targets, tactics, and
modes of operation to surmount the countermeasures. Moreover, as alluded to
above, a related problem is the absence of a definitive answer to the question of “how
much risk is acceptable?” Secretary Chertoff has been open and frank in discussing
the department ‘s risk-based approach - that is - the fact that the country has to accept
some level of risk, as it is not feasible to protect against every real or perceived risk.
Yet that level of acceptable risk, the threshold over which federal resources will be
dedicated to managing risk, is not yet defined.45 In short, the successful risk
reduction measures of today, may not necessarily be as successful in the near-to-
medium term.

42 DHS, Risk Analysis for Fiscal Year 2006 Homeland Security Grants, pp. 8-12.
43 See Henry H. Willis, Andrew R. Morral, Terrence K. Kelly, Jamison Jo Medby,
Estimating Terrorism Risk, RAND Center for Terrorism Risk Management Policy (2005).
See also Managing Terrorism Risk in 2004, Risk Management Solutions, Inc., Newark, CA.
44 If risk is equal to threat*vulnerability*consequence, by mathematical principle if any
value on the right side of the equation is assessed to be zero, risk is also zero. For example,
because the vulnerability of a bridge to a chemical attack is zero, the risk to bridges from
chemical attacks is also zero.
45 Some would argue that given the statutory formula in the USA PATRIOT Act (P.L. 107-
56, §1014, codified at 42 U.S.C., §3711) stipulating that .75 percent of the total amount of
grants shall be allocated to each state (plus the District of Columbia and Puerto Rico), and
.25 % for the territories of Guam, American Samoa, Northern Mariana Islands, and the
Virgin Islands, the risk threshold is minimal, as this formula assumes that all states
experience some level of risk and receive funding as a result. As will be discussed in the
options section of this report, whether this funding was intended to be perpetual, or to bring
all states up to a minimal level of security and capability, and then allow the states to assume
financial responsibility for continued operations and maintenance of established securityth
programs and activities, may be an issue for the 110 Congress. In FY2006, this .75%
formula equates to 40% of the total $1.7 billion homeland security grant appropriation.

As will be outlined below, even if there is agreement on the central elements of
risk, these elements are not necessarily independent of one another, thus requiring a
sophisticated understanding of how each of the elements or variables of risk are
interdependent.46 Stochastic and sensitivity tests for each variable and regression
between variables may be of some utility in understanding how strong the
relationships between variables are.47 For FY2007, as mentioned above, DHS has in
effect assigned a value of one to vulnerability. While understandable at some level,
this essentially eviscerates any interplay between vulnerability and consequence by
having the effect of weighting the consequences of such an attack at 80%. It could
be argued that if the vulnerability of a particular asset is exceedingly low, regardless
of how grave the consequence, the risk to the asset may also be very low and,
therefore, allocating relatively scarce homeland security resources to such an asset
may be inefficient and ineffective.
Insofar as measuring risk is concerned, it could be argued that it is essential to
identify the primary drivers of risk and collect the most appropriate data to quantify
those risks. Collecting and measuring data that is readily available, but not central
to risk yields quantifiable risk scores, yet some could argue that the results would be
indefensible and relatively meaningless. If data which drive risk are not currently
being collected, perhaps in the short-term such data deficiencies might be clearly
recognized and controlled for in calculating risk. Reducing a variable value to zero
or one based on the difficulty of collecting appropriate data to measure that variable
should only be used as a temporary, stop-gap technique, as invariably such practices
result in inaccurate risk assessments. Moreover, the level of confidence decision-
makers have in data collected to assess risk is important. Resource allocation could
be based, for example, solely on population figures, a statistic for which high
confidence data exists. However, detriments of such a system are that population,
in and of itself, may not necessarily be a terrorist target. If the population is not
particularly dense, or exists in an area of marginal national economic impact or exists
in an area where there are few critical national infrastructure assets, the population
may not necessarily be a target for various terrorist groups.
There may be a balance to be struck between a risk assessment methodology that
is too simple and one that is too complex. The question is what is the appropriate
balance, and how a consistent methodology can be applied to a dynamic set of

46 Yacov Y. Haimes, founding director of the Center for Risk Management of Engineering
Systems at the University of Virginia argues “Quantitative risk assessment and management
cannot be conducted on an ad hoc basis or by addressing selective sources of risk.” This
engineering or systems based approach may be one of the areas where there is a
commonality between an engineering approach to risk management and a homeland security
approach, as terrorist threats, infrastructure vulnerabilities and the consequences associated
with a successful attack are also inter-related. See Yacov V. Haimes Risk Modeling,nd
Assessment, and Management (2) (John Wiley & Sons, 2004), p.18.
47 Bayesian probability represents the degree of belief that an event will occur, and has been
used by some in assessing the probabilities of a successful terrorist attack against a target.
In Bayesian analysis, investigators assess the current state of knowledge regarding the issue
of interest, gather new data to address remaining questions, and then update and refine their
understanding to incorporate both new and old data. See [],
accessed Jan. 26, 2007.

terrorist threats. Some homeland security observers might argue that the development
of a long-term risk assessment strategy implemented by a strong DHS or broader
government risk assessment analytic center that has as its sole mission the study of
risk — its inputs and assessment of risk reduction results — may prove highly useful
to help achieve this balance.48 Regardless of the complexity of the risk assessment
methodology, due to the inherent uncertainties associated with assessing risk in a
dynamic counterterrorism context, some level of flexibility in managing risk may be
necessary. Empirical data based on historical terrorist attacks in the United States
may, therefore, continue to play an important role in resource allocation designed to
buy down risk. Some might argue that such an approach constitutes a “rearview
mirror” or reactive perspective. Others might argue that unless and until reliable
intelligence can demonstrate otherwise, historical attack patterns, informed by the
best available current and strategic intelligence, will remain an essential risk
assessment indicator.
Risk Assessment: Some Critical Drivers and Perspectives
Numerous factors drive risk and are essential to understanding risk assessment
and management. This section will provide some basic definitions common to the
risk assessment and management field. Although they are often used interchangeably,
the terms associated with risk assessment have unique, though related, meanings. The
most recent data available is included in the FY2007 Homeland Security Grant
Program - Grant Guidelines and Application Kit, in which it is stated that:
Risk will be evaluated at the Federal level using a risk analysis model developed
by DHS in conjunction with other Federal entities. Risk is defined as the product
of three principal variables: (1) Threat, or the likelihood of a type of attack
occurring, (2) Vulnerability, or the relative exposure of an attack and (3)49
Consequence, or expected impact of an attack.
As alluded to above, DHS also differentiates between the following two types of risk,
the attributes of which are depicted in Figures 3 and 4 below:
!Asset-Based Risk “...employs strategic threat estimates from the
Intelligence Community of an adversary’s intent and capability to
attack different types (e.g. chemical plants, stadiums, commercial
airports) using different methods of attack. The vulnerability of each

48 In a related organizational development, the Homeland Security Advisory Council
recently recommended that DHS establish an Office of Net Assessments to “...provide the
Secretary with comprehensive analysis of future threats and U.S. capabilities to meet those
threats.” Ostensibly, this office would also work with the Director of National Intelligence
to develop a comprehensive National Intelligence Estimate to address threats to the
homeland. See Homeland Security Advisory Council, Future of Terrorism Task Force, Jan
11, 2007, p.7. Any such office would apparently work closely with a potential risk
assessment center, particularly with respect to assessment of terrorist threats and the means
to combat such threats using, among other tools, the homeland security grants.
49 FY2007 Homeland Security Grant Program - Grant Guidelines and Application Kit., p.8.

asset type to each attack method is analyzed to yield the form of
attack most likely to be successful.”50
!Geographically-Based Risk “..considers general characteristics
associated with a geographic area independent of the assets that
exist within that area. This type of risk evaluates reported threats
(credible and less credible), law enforcement activity (FBI and ICE
terrorism case data and suspicious incidents).... Vulnerability factors
considered include international border, number of international
visitors and port channel length. The consequences of an attack on
that area are then estimated to include human
health...economic...strategic mission... and psychological impacts.”51

50 DHS, Overview of the FY2006 DHS Risk Analysis Methodology, p.1.
51 Ibid.

Figure 3. Asset-Based Risk Analysis Attributes
Source: CRS presentation of DHS risk analysis attributes.
Figure 4. State Geographic Risk Analysis Attributes

Source: CRS presentation of DHS risk analysis attributes.

In short, as alluded to above, the DHS formula for assessing risk, whether it is
asset-based or geographic-based, is: Risk = Threat*Vulnerability*Consequence,
otherwise expressed as,
This formula is central not only to the allocation of DHS grant programs, but to all
of the department’s activities, as Secretary Chertoff has stated.52 It is important to
define these variables for a number of reasons:
!Without a common understanding of the lexicon, it is difficult to
assess risk at the strategic and tactical levels.
!In order to gather the appropriate data which serves as an input to the
risk assessment process, state and local agencies must understand
how DHS is defining the elements of risk.
!In the absence of an understanding of each of these elements
individually, it becomes increasingly difficult to comprehend how
they are inter-related and inter-dependent.
There are numerous DHS elements, including the U.S. Coast Guard, Office for
Domestic Preparedness and the Homeland Infrastructure Threat and Risk Analysis
Center (HITRAC), among others, that are responsible for risk analysis and
management.53 An example of how one component defines and practices risk
assessment is instructive. HITRAC is the entity within DHS that is tasked with
combining intelligence threat data as assessed and accessed by the DHS Office of
Intelligence and Analysis with infrastructure vulnerabilities. According to a
HITRAC Representative:
While inherently the most subjective component of the risk equation, threat of
enemy attack is derived from study of enemy intent and capability. Intent of this
adversary is assessed after study of all available information about they want to
accomplish by attacking the United States. We work with our partners in the
intelligence community to understand as much as we are able about the
terrorists’ goals, plans, and desires. We match what we know about the
intentions of the adversary with information we have about what the enemy is
capable of accomplishing. For this part of the equation we rely both on what we

52 On Nov. 28, 2006, Secretary Chertoff stated “I’m going to repeat something I’ve said a
lot in the almost two years I’ve been on this job, which is the core principle that animates
what we do at DHS and this is risk management. It is a recognition of the fact that
management of risk is not elimination of risk. There is no elimination of risk in life....”
Keynote Address by Secretary of Homeland Security Michael Chertoff to the 2006 Grants
& Training National Conference.
53 See General Accountability Office, Risk Management: Further Refinements Needed to
Assess Risks and Prioritize Protective Measures at Ports and Other Critical Infrastructures,
GAO-06-91, Dec. 2005. GAO reviewed the risk practices of these three DHS elements and
concluded, in part, that “progress in risk management is affected by organizational maturity
and the complexity of the risk management task.”

see the enemy discussing, recruiting and training for as well as lessons learned54
from overseas attacks....
This is just one example of how a single entity within DHS is approaching risk and
specifically defining its components. It should be noted that although DHS
headquarters has adopted a particular risk methodology, it is unclear how pervasive
that approach has become outside headquarters, specifically within agencies brought
under the department in 2004.
Given the evolution of DHS’s risk assessment methodology and associated
complexities translating risk assessments into well-targeted allocations of HSGP
funds to buy down risk, there are a number of possible approaches for Congress to
consider in this area.
Possible Approaches for Congress
More than natural disasters, assessing risk emanating from manmade actions is
an extremely difficult task. Methodological tension is created when attempting to
apply a quantitative formula to human-driven activities that require subjective
assessments of enemy capabilities and intentions. Were a truly effective risk
assessment tool to be created to help decision-makers manage risk, it would have to55
recognize that “management of risk is not elimination of risk.” Whether focused
on an “all-hazards” or counterterrorism approach, tools that attempt to quantify risk
will always be inexact. However, sound data, a well thought-out formula, and
consistent application of the methodology are important when attempting to measure
terrorism risk to the U.S. and systematically buy down the risk to a particular location
or asset. Such clarity and consistency are particularly important as the funds granted
based on the DHS’s risk methodology are the primary tools the federal government
has to influence the behavior of state and local partners who will be the first on the
scene of a terrorist attack and will be responsible for returning the community to pre-
incident conditions. Congress has a number of apparent options concerning DHS’s
risk methodology efforts, including the following:

54 See testimony of Melissa Smislova, Acting Director HITRAC, before the House
Homeland Security Committee, Subcommittee on Intelligence, Information Sharing and
Terrorism Risk Assessment, Nov. 17, 2005. How subjective data are treated; the extent of
expert input into a strategic, dynamic, and continual risk assessment process; the continually
updated weighting of various factors; and the presence of both intent and opportunity are
all critical elements of the risk assessment process. Whether HITRAC has the appropriate
mix of personnel, resources, and singularity of focus on risk assessment methods to serve
as a potential, permanent DHS entity to continually refine and implement a dynamic risk
assessment model is an open question.
55 Michael Chertoff, DHS Secretary, Keynote Address by Secretary of Homeland Security
Michael Chertoff to the 2006 Grants & Training National Conference, Nov. 28, 2006.
Available at [], accessed Jan.

26, 2007.

Maintaining Status Quo. Congress may wish to maintain the current policy
and practices associated with DHS’s existing risk assessment methodologies, and
their affect on HSGP allocations. Some might argue that in the absence of measures
to assess historical effectiveness of DHS grant programs, changing formulas and
methodologies may be premature. Others might argue that with more than $12
billion worth of investment aimed at risk reduction and preparedness, state and local
governments should have achieved a level of preparedness and capability that can
allow room for negotiation on financial burden-sharing with the federal government
for those programs deemed worthy of future support.
National Impact Assessment. By FY2008, more than $12 billion will have
been provided to states, localities, and regions to buy down risk and enhance
preparedness and capabilities to prevent a terrorist attack or to respond to such an
attack or natural disaster should one occur. While audits have been conducted to
determine how allocated funds have been spent, a national assessment of how much
risk has been reduced as a result of such expenditures has not been undertaken. How
much has risk been bought down? What investments have yielded the highest rate
of return? What is the risk profile of each grant recipient moving forward? How are
their existing capabilities measured against extant risk? What capabilities gaps exist,
and how can resources best be targeted to address those gaps? There are at least two
possible precursors to the drafting of such an impact assessment: (1) a defensible
methodology that can (a) reasonably define and measure risk, (b) provide a means for
measuring how developing capabilities are reducing that risk, and (c) illustrate how
to identify specific capability gaps which might serve as an input for future allocation
of homeland security grants; and (2) articulation of this methodology, including the
data necessary to conduct such an assessment, to grant recipients. With the results
of such an assessment, federal, state, local, and regional authorities might arguably
be in a better position to understand the most effective and efficient way to target
relatively scarce homeland security resources.
Further Enhance Transparency. While safeguarding the intelligence, law
enforcement, and other sensitive information weighted and analyzed through DHS’s
risk methodology, disclosure of the mathematical equation used to determine threat,
vulnerability, and consequence may allow all applicants and stakeholders to
understand and have a basis to confirm or challenge the results prior to funds being
allocated. It could be argued that providing this level of detail regarding the
methodology and underlying equation may allow those who would seek to attack
U.S. facilities to reverse-engineer the formula, thus increasing the probability of a
successful terrorist attack. Others might maintain that allowing the risk formula
equations to be revealed would encourage state and municipalities to manipulate the
data provided to DHS, thus increasing their chances of receiving additional funding
without a sufficient risk-based justification. Homeland security observers could
counter these arguments by suggesting that though there may be the potential for
those wishing to take advantage of the transparency of the system, the positives
include possible increases in information sharing between DHS and state and local
governments due to an understanding of how data is used and as such result in
increased confidence in the other entity. Some could argue more transparency would
allow DHS to more confidently allocate resources, as enhanced transparency may
reduce the surprised outcries that seem to arise with each cycle’s award
announcements. This argument is based on the assumption that grant applicants that

are comfortable with the risk assessment process and familiar with the data streams
used to calculate risk. As a result, the applicants may be less likely to be surprised
by their jurisdiction’s ranking and awards.
Development of a Risk Strategy Both Within DHS and Throughout
All Government Agencies. Since the establishment of DHS in March of 2003,
the department’s risk formula has evolved. Though it could be argued that these
changes are indicative of a maturing organization and process, it is possible that the
lack of a coherent, long-term, overarching risk strategy, which forms the foundation
of departmental activities, could have negative repercussions for buying down risk.
Without a clearly articulated risk methodology based on fundamentals intrinsic to
risk, yet adaptive to changing threats, a baseline understanding of the nation’s risk
profile may never be achieved and the department’s risk assessment process could
potentially be vulnerable to budget fluctuations and political influence. This is
especially important given the apparent division of risk assessment responsibilities
throughout various offices and directorates within the department.
Arguments can be made that such an overarching risk philosophy needs to be
adopted throughout the federal government. In a December 2005 report on homeland
security risk management, GAO concluded that
for the results of a risk management system to be meaningful and useful, all
related agencies should be using similar methods. If agencies’ methods are not
compatible, then comparisons between agencies become difficult and sector or
national risk assessments becomes less reliable. In our earlier work, we
concluded that a structured, systematic approach to risk management offers the
best assurance that activities designed to protect the homeland and combat the56
effects of terrorism will produce the most effective and efficient results.
A cohesive risk strategy and agreement on core terms amongst disparate agencies is
desirable because many aspects of the risk assessment process are dependent on57
functions performed by agencies outside the department. However, the necessity
of common definitions and standards goes beyond the federal government. As states
and localities continue to provide information to be included in the risk assessment

56 U.S. Government Accountability Office (GAO), Risk Management: Further Refinements
Needed to Assess Risks and Prioritize Protective Measures at Ports and Other Critical
Infrastructure,”GAO-06-91, Dec. 2005, available at [
d0691.pdf], accessed Jan. 26, 2007.
57 A hypothetical example is provided by examining the FY2007 risk formula weights. This
year’s formula assigns a 20% weight to the Threat (T) variable. Threat is determined using
a variety of data points, to include detainee reporting, on-going plot lines, credible threat
reporting, and investigations. The investigations portion of the threat variable is comprised
of terrorism investigations-related information provided by the FBI and Immigration and
Customs Enforcement (ICE). Hypothetically, if the FBI and ICE did not operate using the
same conception of what constitutes a terrorist threat and/or utilized alternate metrics to
determine source credibility and determine corroboration, the output of DHS’s risk
assessment could be skewed. This is just one of many potential unintended negative
consequences that can occur if federal agencies involved in aspects of the risk management
process are not operating using the same definitions.

process, to include, information on critical infrastructure sites within their respective
jurisdictions and, eventually, investigative information, the rationale for attempting
to develop national-wide risk assessment strategy at all levels of government
becomes stronger.
Appointment of a DHS Risk Assessment Manager (RAM). With
regards to DHS’s risk assessment efforts, the department might potentially create a
Risk Assessment Manager (RAM) position charged with better integrating the
various elements working on aspects of the risk assessment process. In addition, the
RAM might be assigned the responsibility of creating and subsequently
implementing a department-wide strategic risk strategy. Such a position could be in
an advisory capacity to the Secretary or entail operational and oversight functions of
a permanent DHS Risk Assessment Center (see below). The creation of a RAM
within DHS responsible for coordinating all inter-departmental risk methodology
activities would provide Congress, other federal government agencies, and state and
local homeland security leaders with a single person accountable for explaining the
complexities of future risk management strategy efforts and a specific office to
receive suggestions regarding improving current processes. The RAM could also
serve in a liaison capacity to ensure external agencies are familiar with DHS’s
approach to risk and facilitate agreement on key terms and processes amongst other
Creation of a DHS Risk Advisory Board (RAB). As previously stated,
Secretary Chertoff has made it clear that risk assessment underlies all elements of the
department’s operations. Risk management and assessment are disciplines which are
relatively well-developed across the private sector. Moreover, within the U.S.
government, there are numerous experts on risk assessment. To ensure that the
Secretary is getting the best possible advice as to how DHS should continue to refine
its risk management activities, a formal board of senior- level risk management
professionals might be established to advise the Secretary. While not having
program management responsibilities, the Risk Advisory Board (RAB) might advise
the Secretary on the best risk management practices across industry and government.
It could also lead the DHS effort, with substantial input from a potential Risk
Assessment Center (see below), to draft a long-term risk management strategy.
Creation of a Permanent Risk Assessment Center (RAC). While the
proposed RAB would operate on a strategic level, it could be beneficial for DHS to
examine its current efforts to apply risk strategy to its various programs and
initiatives. Risk is central to DHS’s operations. DHS may not necessarily have the
appropriate resources dedicated full-time to (1) pro-actively assess the dynamic
drivers of risk, (2) lead the collection of the right types of data to assess risk, and (3)
develop a methodology to analyze how effectively past homeland security grant
investments have “bought down” risk. These tasks are relatively complex and, it
could be argued, require the formation of a group of professional methodologists
whose sole function is risk assessment. While elements of this capability may exist
now within the Preparedness Directorate, no single group has this sole responsibility.
For example, HITRAC is charged largely with mapping vulnerabilities to threats,
which is an essential function unto itself.

There are several potential benefits offered by a risk center: First, a permanent
center would likely help DHS to think strategically about the current risk assessment
process. Second, continued attention to this issue and sufficient time to address it
would probably allow DHS to create more effective assessment tools and use those
multiple tools in tandem to analyze various risk areas. Third, the risk center would
potentially allow DHS to draw on the existing expertise and resources of all the
offices and divisions within DHS, as well as external entities, such as other
Intelligence Community agencies.
Implement 9/11 Commission Recommendation. As mentioned above,
the 9/11 Commission recommended that “...homeland security assistance should be
based strictly on an assessment of risks and vulnerabilities...But federal homeland
security assistance should not remain a program for general revenue sharing. It
should supplement state and local resources based on the risks or vulnerabilities that58
merit additional support.” Some homeland security observers could interpret this
literally to mean that after six years and $12 billion of homeland security
investments, most states should be at some minimal level of security and capability.
Therefore, some might argue, the time may be appropriate to revisit the USA
PATRIOT Act formula which results in 40% of the total DHS grant funding being
allocated based on formula which is not based primarily on risk. Others might argue
that until a methodology is developed to ascertain how prior years’ grant allocations
have decreased each state’s risk levels, it may be premature to alter the formula.
Questions that might be addressed when considering this options include
!What duration did Congress originally intend when it created the
DOJ and now DHS homeland security grants?
!What measures are in place to ensure that state and local
governments are spending resources in a manner that is consistent
with congressional intent?
!To what extent, if at all, has congressional oversight yielded any
indications that state and local governments have come to view
homeland security grants as entitlements?
!Has DHS or Congress entered into discussions with state and local
governments about sustainable burden-sharing arrangements with
respect to state and local programs assessed as being worthy of
continued financial support?
Treat Terrorism Prevention Grants Uniquely. Secretary Chertoff
recently stated that one of the unique areas in which the DHS can add value is in the
area of prevention. He stated, “...obviously, when it comes to terrorism, our best
solution is a solution that prevents a terrorist act before it actually comes about. And
a critical element in that is our early warning system, which is intelligence....”59
Notwithstanding this statement, a review of aggregate budget data for homeland

58 National Commission of Terrorist Attacks Upon the United States, The 9/11 Commission
Report: Final Report of the National Commission of Terrorist Attacks Upon the United
States, Authorized Edition (New York: WW Norton and Company, 2004), p. 396.
59 Keynote Address by Secretary of Homeland Security Michael Chertoff to the 2006 Grants
& Training National Conference, Nov. 28, 2006.

security expenditures suggests that less than 1% of what the U.S. government spends
on homeland security is dedicated to intelligence and warning, an essential element
in the prevention component of homeland security.60 While there are many
similarities in the response capability, whether the response be to a successful
terrorist attack or natural disaster, terrorist acts can be prevented, natural disasters
cannot. Information related to meteorology is different from intelligence related to
national security. The threat element of the risk reduction formula is what
differentiates terrorism from all other hazards. As mentioned throughout this report,
terrorist threats are dynamic and evolve over time; some might argue the risk
assessment methodology and attendant grant allocation process should be as agile as
the adversary against which its resources are directed. DHS currently has an
Intelligence Enterprise Strategic Plan, and the FY2007 grant application kit provides
guidance for state, local and regional intelligence fusion centers. Yet, the linkages
between these two documents and the grant process, some would argue, is tenuous.
One of the Homeland Security Presidential Directive (HSPD)-8 derived “Universal
Tasks” is prevention. Drawing upon the National Strategy for Combating Terrorism,
Congress may ultimately consider recommending that DHS provide a specific and
articulable strategy and approach to terrorism prevention, which would include a
focus on how the grant allocation process is tailored to fully leverage intelligence
across levels of government to prevent terrorist acts.

60 See Office of Management and Budget, Analytical Perspectives: Budget of the United
States Government Fiscal Year 2007, Table 3-2, p. 33. Intelligence and warning is one of
six critical mission areas outlined in the National Strategy for Homeland Security. There
is at least one caveat to these figures. While the figures for the intelligence and warning
include those reported by the Departments of Defense and Justice and the Intelligence
Community Management Account, other Intelligence Community funds dedicated to the
homeland security intelligence and warning function might not be captured in the OMB

Legislative Activity on DHS Risk Formula for Grants
S. 4
S. 1013S. 21H.R. 1544H.R. 1ImprovingAmerica’s Security
HomelandHomelandFaster andImplementing theby Implementing
SecuritySecurity GrantSmarter Funding9/11 CommissionUnfinished
FORWARDEnhancementfor FirstRecommendationsRecommendations
Funding Act ofAct of 2005 thResponders Act ofAct of 2007 thof the 9/11
2005th109 Congress2005th110 CongressCommission Act of
109 Congress109 Congress2007
110th Congress
50 States, DC, &a50 States & DC =Most Statesc & DC50 States, DC, & PRdSHORT TITLE. This
Puerto Rico (PR) =the greater ofand PR will receiveare insured to receiveact may be cited as the
0.25% of the SHSGPeither (1) 0.55% of0.25% for coveredno less than 0.25%`Improving America’s
monies, while theall appropriatedgrants, however statesand those that have anSecurity by
four US territoriesfunds, or (2) thethat qualify as havingapproved plan andImplementing
receive 0.08% of thestate’s slidingadditional high-riskmeet at least one of theUnfinished
SHSGP funding. Noscale baselinebqualifying criteriaadditional high riske Recommendations of
ionsother grants arementioned in thisallocationmultiplied bywill receive 0.45%. Four US territoriescriteria”will receiveno less than 0.45% ofthe 9/11 CommissionAct of 2007’. SEC. 2.
catsection. 28.62% of the totalwill receive 0.08%the funds available forSENSE OF
llo amountand directly eligiblecovered grants for thatCONGRESS.
TOTALappropriated fortribes would receivefiscal year. The fourIt is the sense of
mum AGUARANTEED = 13.32% of SHSGPthe Threat-BasedHomeland Security0.08%. US territories willreceive no less thanCongress thatCongress should enact,
niallotmentGrant Program. PRTOTAL0.08%. and the President
= 0.35%, and theGUARANTEED= should sign, legislation
ory Mi*Includes: SHSGP,UASI, LETTP, andfour US territories= 0.055%. between 13.32% -23.72% plus whateverTOTALGUARANTEED=to make the UnitedStates more secure by
atutCCP. percentage is awardedbetween 13.32% -implementing
StTOTALto directly eligible23.72%unfinished
GUARANTEED=tribes. recommendations of
28.62% based on *Includes: SHSGP,the 9/11 Commission
option (1), option*Includes: SHSGP,UASI, andto fight the war on
2 was notUASI, LETTP, andterror more effectively
calculatedCCPand to improve
homeland security.

*Includes: SHSGP,

S. 4
S. 1013S. 21H.R. 1544H.R. 1ImprovingAmerica’s Security
HomelandHomelandFaster andImplementing theby Implementing
SecuritySecurity GrantSmarter Funding9/11 CommissionUnfinished
FORWARDEnhancementfor FirstRecommendationsRecommendations
Funding Act ofAct of 2005 thResponders Act ofAct of 2007 thof the 9/11
2005th109 Congress2005th110 CongressCommission Act of
109 Congress109 Congress2007
110th Congress
The bill creates aThe bill does notThe bill containsThe bill directs the
Homeland Securitystipulate how thealmost the exactSecretary of Homeland
Grants Board toremaining fundinglanguage as S. 1013Security to “evaluate
allocate thewould bewith regards to aand annually prioritize
remaining fundsallocated.similar Board toall pending
based on an annualallocate the remainingapplications for
ngprioritizedrisk-based ranking,funds based on arisk-based rankingcovered grants...basedupon the most current
undiwhich is based on theand prioritizingrisk assessment
Fdegree to which theterrorist threats.available...”
skmonies would
Rienhance essential
capabilities to lessen
the threat,
vulnerability, and
consequences off
at t ack.
Source: CRS presentation of select legislation in the 109th and 110th Congress.
a. There is a requirement for states to have a security plan in order to qualify for the automatic grant allocation
minimum-Each State that has an approved State homeland security plan receives no less than 0.25 percent
of the funds available of the State Homeland Security Grant Program.
b. The sliding scale defined in Section 1801, “represents each statess weighted share (where weighting is done based
on a combination of population and population density) of the pot of money (28.62%) that results from adding
together the 0.55% minimum distribution to each state, plus the amounts allocated for the District of Columbia
and the remaining territories.” Homeland Security Grant Enhancement Act of 2005, report of the US Senate
Committee on Homeland Security and Governmental Affairs to accompany S. 21, S.Rept. 109-071.
c. There is a similar requirement for states to have a security plan in order to qualify for the automatic grant allocation
minimum in S. 1013 and S. 21.
d. H.R. 1 stateseach of the States, other than Virgin Islands, American Samoa, Guam and the Northern Mariana
Island s...”
e. “Additional high-risk qualifying criteria consists of - (A) having a significant international land border; or (B)
adjoining a body of water within North America through which an international boundary line extends. H.R.
1, Implementing the 9/11 Commission Recommendations Act of 2007, Sec. 2004-6.
f. S. 1013, Sec. 1802, A, I, May 12, 2005.