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The Department of Homeland Security (DHS) is responsible for protecting the United States from terrorism. It achieves this goal partly through the Urban Areas Security Initiative, which allocates resources to states and urban areas. Until DHS can know the effectiveness of available risk-reduction alternatives or determine reasonable minimum standards for community preparedness, allocating homeland security resources based on risk is the next best approach; areas at higher risk are likely to have more and larger opportunities for risk reduction than areas at lower risk. This monograph offers a method for constructing an estimate of city risk shares, designed to perform well across a wide range of threat scenarios and risk types. It also proposes and demonstrates a framework for comparing the performance of alternative risk estimates given uncertainty in measuring the elements of risk. Finally, it makes five recommendations for improving the allocation of homeland security resources: DHS should consistently define terrorism risk in terms of expected annual consequences; DHS should seek robust risk estimators that account for uncertainty about terrorism risk and variance in citizen values; DHS should develop event-based models of terrorism risk; until reliable event-based models are constructed, DHS should use density-weighted population rather than population as a simple risk indicator; and DHS should fund research to bridge the gap between terrorism risk assessment and resource allocation policies that are cost-effective.

The research described in this report results from the RAND Corporation's continuing program of self-initiated research. Support for such research is provided, in part, by donors and by the independent research and development provisions of RAND's contracts for the operation of its U.S. Department of Defense federally funded research and development centers.

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