Financial-Services Execs Remain Focused On Disaster-Recovery Strategies

Emergency planning is still top priority for execs, if Wednesday's capacity crowd at Wall Street & Technology magazine's Disaster Recovery and Business Continuity Conference in New York is any indication.

Executives from the top financial-services firms were on hand to provide insights into their business-continuity strategies and budgets, and to discuss changes since last year's terrorist attacks. Since Sept. 11, business-continuity budgets focused on business requirements, says Roseann McSorley, regional head for Americas business continuity at Deutsche Bank AG. The attacks were more disruptive than most companies could have planned for, she says. Consequently, executives are more aware of business requirements that previously didn't get so much attention.

Business-technology managers must focus on getting support from senior management for their business-continuity plans--something that should be easier to get following the attacks, says Paul Honey, director of global contingency planning at Merrill Lynch. Honey relies on financial logic to help win support from his business partners. For example, companies typically assign operational-risk capital--money set aside to use in disasters that goes on the books as a capital charge. Honey convinced management at his company that it could spend that money on an effective continuity plan, thereby reducing risk and simultaneously saving on the capital charge.

Each company must understand and "tier" all critical business areas and include them in the backup plan, Honey says. That includes analyzing the effects of tangible losses such as revenue, breach of contract, or ratings downgrades that may result from a business outage. But also critical is understanding how intangible losses such as reputation, market share, and employee retention could affect a business. After assessing the impact of these losses, Merrill Lynch devised a plan for prioritizing each item in its business-continuity plan.

Execs at the conference also said they're focusing on geographical distribution and nonemergency usefulness of backup facilities. The companies agree that it's imperative to run their entire businesses without breaking commitments to customers in the event of a disaster, but how each accomplishes that varies. Rather than build replica sites in unused backup centers, J.P. Morgan Treasure Services is considering splitting its business transactions among several primary sites, chief technology officer Louis Conte says. "That way, you don't have to worry about moving as many people, and you're in a better position if you can use these sites in day-to-day operations," he says.

Just how much distance a business should have between facilities is arguable. Some execs say they want to be able to drive to the backup site within three hours, while others insist on having the site as far from the original operations as possible. Overall, business needs and logic should prevail when planning backup-facility strategy, says Dan Hamill, VP of eastern region operations at SunGard Availability Services. "I always asked this one off-shore Florida customer, 'Why is your data center on an island?'" he says. "I never thought to ask my New York customers that."