Business Continuity, Sans Building10.25.2013
Hurricane Sandy forced Wall Street to scramble in the days and weeks after the October 2012 ‘superstorm’, as floodwaters knocked out power and destroyed basement and ground-floor boilers and mechanical rooms at scores of buildings in lower Manhattan and Jersey City and Hoboken, New Jersey.
New York buildings rendered temporarily unusable one year ago included Citigroup’s 111 Wall St. and 388 and 390 Greenwich St.; One New York Plaza, whose tenants include Morgan Stanley and Wells Fargo; and 55 Water St., whose tenants include Depository Trust & Clearing and Standard & Poor’s. Across the Hudson River, Lord Abbett’s headquarters at 90 Hudson Street, Jersey City, was out of service for a week.
For asset managers, temporarily losing access to office phones and computers is one thing, but making do without a centralized trading desk — and its collaborative processes that are vital to investment decision-making and best execution — is another thing. With that in mind, companies are revisiting their contingency plans for when the next ‘hundred-year event’ strikes.
“You have to think about the long-term effects when you have a business that cannot sustain any sort of outage,” said Jerry Dobner, chief technology officer at interdealer broker GFI Group. “When you operate a trading floor there is no room for any sort of outage. If you do have any sustained outage, you are permanently out of business.”
After Sandy struck a few days before Halloween, GFI couldn’t get back in its headquarters at 55 Water St. — the largest office building in Manhattan — until early in the New Year. The building’s lobby flooded waist-high, and the concourse and two sub-basements, where all switches and generators were located, was wiped out.
The challenge is not just mopping up, repairing, and re-opening buildings, but also ensuring that until the all-clear signal, hundreds or even thousands of employees in multiple departments were set up to work remotely, and do so as seamlessly as possible.
“We were out of our building for 10 weeks or maybe even longer,” said Dobner. “If you add up what it costs, the cost is huge. We needed some type of facility to house these employees in case of a prolonged facilities outage. We turned to external providers to provide us with high-quality shared office space that is fully integrated into our global corporate network.”
GFI’s disaster recovery plan includes a backup site in Iselin, N.J., where it has 200 guaranteed seats that are fully-tested and operational, and an option on another 90 seats.
2 Offices > 1
Larger firms with multiple locations have a built-in operational safeguard against building loss.
Thrivent Financial, which manages more than $80 billion, is based in Minneapolis and maintains a large office in Appleton, Wisconsin. “They’re physically five hours apart and on different parts of the power grid,” said Monica Kleve, director of business and technical solutions for Thrivent’s investment division. “We benefit from that.”
Thrivent owns a separate off-site facility and leases another one. “We have several layers in our facility plan,” Kleve told Markets Media
In the wake of Hurricane Sandy, Kleve and colleagues have worked to bolster work-from-home capabilities of Thrivent employees, specifically with regard to staffers bringing home work-issued laptop computers. “Sandy didn’t affect us directly from a building perspective, but we used it as an opportunity to take a look at our plan,” Kleve said.
According to the U.S. Securities and Exchange Commission’s August 2013 assessment of business-continuity plans in the wake of Sandy, investment advisers generally switched to back-up sites or systems in advance of expected trouble. Some advisers reported buildings were shut for days or weeks, and there were extended outages of power, phone systems, and internet.
Some advisers maintained critical business functions in more than one location, perhaps by establishing a remote, backup location with an unaffiliated adviser. More often, advisers used employees’ homes, branch offices, data centers or hotels as alternate locations, and advisers deployed back-up generators at home to ensure connectivity.
“First and foremost it’s about preparation and planning, which starts with working with the business and management to answer some tough, yet basic key questions,” said Christopher Horne, assistant vice president, business continuity management and corporate security at CIBC Mellon. “For example, what are the essential requirements to deliver critical services? Which staff has critical functions, and where should they be directed to work in the event a building is unavailable? How will clients, employees and other stakeholders be kept informed?”
CIBC Mellon is an asset servicing provider, so asset managers, institutional investors and other stakeholders rely on it to have core services available. “We maintain backup sites, alternate working arrangements and we leverage a global network through our parent companies BNY Mellon and CIBC, which provides us with strong redundancy in the event of a widespread issue,” said Horne. “We have a robust incident management process, which we exercise regularly.”
“It’s primarily an issue of setting up offsite backup, as well as trading facilities,” said Ron Geffner, partner at law firm Sadis & Goldberg. “Cost varies depending on the needs of the firms. And the expertise is highly dependent on the strategy employed by the manager. Some managers are active traders and much of the business is outsourced, while others have highly proprietary internal models that require significant investments in hardware and support.”
Noted Dobner of GFI Group, “The only way to really recover from a building loss is to have a backup trading floor. Some companies have multiple trading programs located on their physical site where they can move traders around and that is a little more practical. We tend to be more concentrated so, therefore, we need to have operators at our backup site.”
Investors are seeking the tax efficiency, trading flexibility and cost benefits of ETFs.
US Department of Labor has allowed pension plan fiduciaries to consider ESG factors.
Goldman Sachs Asset Management agreed to pay a $4m penalty.
FINRA membership marks further momentum in WisdomTree Securities' digital strategy.
The prior administration’s restrictions on retirement plans and ESG were removed.