Time to dust off your continuity plan

Aug 25, 2013 @ 3:16 pm

Here is a news flash: Hurricane season is half over. But the fact that the country has escaped a major storm shouldn't be cause for financial advisers to rest easy, especially when it comes to business continuity plans. The time to make sure that such plans are up-to-date and functional isn't when they need to be implemented, but when things are calm.

Like now. Although it is true that there is nothing like reality to put the best-laid plans to the test, a better strategy is to keep it road-tested.

Memories tend to be short, and it was less than a year ago that Hurricane Sandy barreled up the East Coast. In its wake, the storm left billions of dollars in damage, closed the stock market for two days and left some advisory firms in the Northeast shuttered for up to a week because of power outages and other service disruptions.

In an era when information, be it stock quotes, news stories or performance data, is available 24/7, and when most clients expect their adviser to be technologically savvy, it is simply not acceptable for a business to be knocked out of communication by a storm, power outage or software glitch. We all witnessed the unexpected last Thursday when a technology hitch halted trading on the Nasdaq for three hours.

The problem is that when everything is running smoothly, no one thinks about what will happen and how business will get done when disaster strikes.

So business continuity plans often fall into a black hole. The plan is there — somewhere — but is rarely reviewed, updated or tested.

Presumably, many advisers, in the aftermath of last October's hurricane, did brush the dust off their business continuity plans to make sure they were as up-to-date as possible.

But it has been another year, so why not do it again?

Indeed, this month, regulators from the Commodity Futures Trading Commission, the Financial Industry Regulatory Authority Inc. and the Securities and Exchange Commission issued a four-page report telling advisers and other financial services professionals to enhance their business continuity plans.

Specifically, firms need to be ready for emergencies that simultaneously cause widespread disruption in telecommunications, transportation, electricity, fuel and water services, the regulators said.

Are you prepared?

Based on the report, here are some of the questions that advisers need to ask themselves:

 Do you have redundant tel- ecommunications services?

 Is your backup facility so close that it could be affected by a disaster that strikes your main office?

 What is your backup communications plan to reach clients, counterparties and other key groups?

 Do your clients know what your backup communications plan is?

 Can you update your website remotely with information about your firm, and provide contact information?

 Are your employees fully versed on all your backup plans?

 What are your plans for employees if they suffer power outages or other disruptions?

That just skims the surface. A good plan needs to consider which functions are business-critical, what is the minimum number of staff members needed to function, what systems are highly specialized, where and how electronic records are stored and whether short- and long-term strategies for keeping the doors open have been worked out.

Some business continuity plans delve into succession as well: How will the business function in the event the founder, owner or key personnel suddenly and unexpectedly become disabled or die?

To be sure, real-world events can overwhelm even the most comprehensive preparations.

Talking about doing business in the aftermath of Hurricane Sandy, Ian Armstrong, chief operating officer of Clear Harbor Asset Management LLC, told InvestmentNews' Liz Skinner: “The best-laid plans go out the window in the real world. Our continuity plan wasn't seamless, but it held up pretty well.”

It wasn't covered in dust, either. Make sure yours isn't.


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