GLOBAL - Should terrorists strike again, financial services firms may find their disaster recovery plans lacking - ignoring lessons learnt from the tragic events of September 11 which this week marks its first anniversary.
The research, conducted by the Institute of Financial Services and commissioned by IT firm IBM, revealed only 61% of 115 senior executives from 61 financial services companies interviewed believe their operational resilience programmes are effective.
Only half (51%) can definitely measure their operational risk exposure and a mere 46% have near real time operational risk detection systems in place.
It is not surprising therefore that well over half of all executives interviewed would be willing to join an industry wide data sharing consortium to improve their understanding of operational risk and resilience.
Eric Dobby, director, Institute of Financial Services, said: The terrorist attacks of last year have focused minds on risk resilience ... 55% plan to increase their expenditure in this area.
“Whether the current financial services industry tactics will necessarily result in more robust operational resilience programmes remains to be seen.
Just as New York’s fire and police departments have pledged to improve communication and deployment procedures after the publication of two reports examining the effectiveness of the city’s emergency services on September 11, financial firms are being urged to up their game with regard to disaster recovery.
In the UK, the Financial Services Authority (FSA) said it is essential all firms in the sector ensure they are properly prepared.
Michael Foot, a managing director at the FSA, said: None of us can afford to be complacent about the challenges that inevitably arise in an environment where the potential threat is so great.
After September 11, financial institutions are feeling increasing regulatory pressure to tackle operational risk and ratings agencies are also taking a closer interest in the issue of operational resilience.
In addition, pension funds may be forced to meet member insurance costs, as an increasing number of insurance companies look to cap group policies following the terrorist attacks, according to Mercer Human Resource Consulting. Some insurers have decided to impose a maximum exposure limit of £100m per event or even impose a ‘catastrophe limit’ depending on geographical locations, particularly densely populated areas.
Reflecting on the tragic events of last year, Alan Brown, group CIO and vice chairman, State Street Global Advisors (SSgA), said: “We realised we had all made a heroic, and, as it turned out totally unreasonable assumption in terms of disaster recovery. If you went to our disaster recovery site before this happened you would have found a lot of telephone directories telling us the telephone numbers of all of the people that we need to talk to but not the telephone numbers of their disaster recovery sites.”
The IBM study discovered that whole sections of the financial services infrastructure relied on only three to four companies for such back-up.
Brown said, like the FSA, SSgA had just last month tested in real time its disaster recovery capabilities which includes “more back up desks, more bandwidth, more PCs and all the rest of it ... but there is always more work to be done on disaster recovery. It’s never a job completely done.”
He added that September 11 is not the only reason for reevaluating recovery plans: “Our back-up site to our Montreal office was Boston and a while back there was an ice storm which not only froze out Montreal but actually got to within 200 miles of Boston. If it had, we would not ha
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