Financial Markets Prepared For Disasters, But Not Pandemics
A GAO report urges market organizations to complete plans for pandemics and further improve telecommunications systems.
U.S. financial markets have made significant progress in terms of disaster preparedness, a recently report has found.
The Government Accountability Office released a report (PDF) Tuesday stating that the country's seven critical financial market organizations have increased their ability to withstand widespread disaster. The report analyzed actions that the organizations have taken to prevent attacks and pandemics, recovery and response plans, telecommunications resiliency and regulators' efforts to improve market resiliency.
The GAO, which has issued several scathing reports of government preparedness, found that exchanges, clearing organizations, payment system processors, brokers, dealers and banks have reduced potential for operational risks from telecommunications outages. The report praised the organizations for practicing emergency preparedness scenarios, creating disaster and recovery plans, increasing physical security and setting up telecommunications and technology systems that are less likely to be completely disabled in the event of an attack.
Still, it strongly urged market organizations to complete plans for pandemics and further improve telecommunications systems. Specifically, GAO urged mapping circuit routes and determining how widespread telecommuting would impact network capacity.
Cyber security expert Richard Clarke once warned about the potential for a telecommunications disaster, saying one could be like an "electronic Pearl Harbor," and analysts with the Congressional Research Services have estimated that a cyber attack could cause more than $200 billion in damages.
Chair of the House Committee on Energy and Commerce, John Dinggell, D- Mich., and five other committee members responded to the report by commending several high-ranking market leaders, but urging them to complete formal plans for business continuity during pandemics. They sent the letter to GAO Comptroller General David M. Walker, Securities Exchange Commission Chairman Christopher Cox, Federal Reserve Board of Governors Chairman Ben Bernanke, and Currency Comptroller John C. Dugan.
"Keeping America's economy secure and operable is paramount to maintaining normalcy in the face of disaster," Dingell said in a prepared statement. "It is an enormous relief that financial institutions are taking steps to prevent financial market failures -- and the widespread confusion that would result -- in the event of a terrorist attack or other unanticipated calamity. We look forward to even more progress by financial organizations in this area."
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