	Introduction

As early as his Senate confirmation hearing, Homeland Security Secretary Michael Chertoff advocated a risk-based approach to homeland security. 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." However, risk assessment does not occur in a vacuum; the end goal is to reduce and mitigate risk. Others have written extensively about DHS grant programs and the allocation of such programs across the country. 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. This report may be updated. What follows is a chronological overview of the DHS risk assessment methodology examined through the prism of the Homeland Security Grant Program. 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. Is the risk to people, infrastructure, the economy, or all of the above? Risk Management and Assessment: Complex Activities

The concept of risk—how to define, assess, and manage it—is relatively complex. 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. 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. 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. 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.
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.