In the last few years, several events have highlighted the risk of possible major accidents triggered by terrorist attacks within chemical and process facilities. Due to the increased attention for security issues, an optimal allocation of security measures, including related cost issues, becomes progressively more important. Despite the existence of economic models for supporting decision-making processes in general, for instance cost-benefit and cost-effectiveness analyses, no specific economic models are available in the domain of operational security (including counter-terrorism decision-making) to be applied within the chemical and process industry. In this study, a novel method for cost-benefit and cost-effectiveness analysis for the allocation of physical security measures was elaborated and tested using a case study. Starting from a site-specific analysis of the baseline physical security system performance, the model allows comparing and evaluating the costs of different security upgrades with the (hypothetical) benefits related to the avoided losses. The approach developed enables selecting economically feasible security measures, or a combination of such measures with a maximum net present value, within the budget constraints of a chemical plant. (C) 2017 Elsevier Ltd. All rights reserved.