Prepare Before Disaster Strikes

CU360
April 9, 2010 | COMMENTS

Recent earthquakes in Haiti and Chile highlight the need for preparation and planning in the event of a natural disaster. Credit unions play a key role following a disaster because members often lack power or an Internet connection but desperately need access to funds.

In the wake of the devastating Haiti earthquake, the Bank Administration Institute's Banking Strategies magazine reported on business-resumption plans among institutions located along the infamous “Ring of Fire”—the area surrounding the Pacific Ocean prone to frequent earthquakes.

Executives at these institutions say their disaster-recovery plans must take into account the scope of different events, varying degrees of severity, locations of impact, and the potential effect on different operations.

To meet these imposing responsibilities, the financial services industry has an advantage in being better prepared than most for potential disaster. That's because it faces so many regulatory requirements for data integrity and protection, says Bill Hughes, director of consulting services at SunGard Availability Services.

“These institutions also have a natural resiliency,” Hughes adds. “If other channels are down, customers can go to a branch. If that branch is closed, they can go to another branch.”

Chief information officers say the pressure to recover quickly from a disaster has increased in recent years. The old thinking was that an institution could come back into operation in 24 hours. Now, people expect information always at their fingertips.

Each institution must establish priorities for resuming operations but also maintain flexibility depending on the nature of the event. For example, online access could in some cases be the easiest channel to maintain, but in other situations keeping at least some branches open is a priority.

Certain business-resumption issues hold true across virtually all financial institutions, such as ensuring that delivery-channel systems and account data are backed up at a separate location, and maintaining a plan to communicate with employees and customers.

Other issues to be handled according to the circumstances of each institution include whether:

• Data back-ups are handled internally or by a third party;
• External backup is located close to the institution or hundreds of miles away; and
• Other delivery channels— sometimes non-traditional — can be used to stay open and offer service.

Among the institutions interviewed, some choose to manage their own duplicate data systems. The decision not to outsource seeks to avoid the risk of “standing in line” with other institutions in the event of a major disaster.

Other techniques reported by Pacific Rim institutions:

• Designate “area captains,” based on geography, who can coordinate with each other to determine which branches can be kept open and how to get them staffed.
• Create an emergency management team of key people responsible for a variety of jobs, including damage assessment and communications. The team works frequently with individual business units so everyone knows their role.
• Develop a multi-faceted strategy that takes into account how a natural disaster could affect different branches across a wide geographic area.
• Consider local geography. For example, what happens in locations that rely heavily on bridges? Loss of access dictates where members can go and where employees might report on an interim basis.
• Maintain a listing of local and regional media outlets in all the communities where your institution operates.

‘Test, test, and test'

“The best thing is to test, test, and test,” advises an executive whose bank branches border California 's San Andreas Fault . While annual review and testing is the baseline, her institution recently began conducting a quarterly run-through in which it shuts down primary corporate systems and routes all of its work through a backup site.

A by-product of frequent field-testing is that employees also are ready to apply appropriate skills when the institution faces other interruptions, such as crippling winter weather or a bomb threat.