Chapter 2: Risk Management in National Security Strategies
1. STRATEGIES FOR RISK MANAGEMENT The security strategies of states make it clear that to preserve peace countries must not only prepare for war; they must engage in continuous conflict. This is an era of prolonged, multi-front conflict1 not only against concrete enemies, but also against emerging threats and potential risks. Concrete enemies must be battled using modern precision weapons aiming at zero damage to one’s own forces. Threats must be removed employing conventional and unconventional methods. Risks must be managed constantly, through astute intelligence and covert operations, so that they never become threats. Nuclear weapons are one of the tools used to manage proliferating threats and risks because they still instill immense fear in adversaries. 1.1 Risks and Hedging The jargon of risk management used in finance has been implanted in the military field. The unpredictable and uncertain international security environment permeates the security strategies of states. In this risky international environment, states must hedge against risks and develop military strategies to deal with every eventuality. Hedging is a form of insurance. When people hedge against a financial risk, they are insuring themselves so that in case the risk materializes the negative effects are reduced. For instance, investors offset the risk in security A by buying a security B whose returns are negatively correlated with security A (therefore, when returns in security A go down, returns in security B go up). The same principle applies in military strategy. A military strategist views the international environment as a bundle of...
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