Looking back at September 11, a number of lessons are emerging.
First, there is an industry-wide recognition that everyone needs to review their disaster recovery plans so that they are prepared for something as serious as the destruction of an entire office building. Home phone lists need to be updated more regularly, evacuation drills need to be more frequent, and backup systems need to be located farther away from the primary systems.
“Everyone is going to pay more attention to security and evacuation,” said Lehman’s Nastro. “We have disseminated fire drill procedures, we did it periodically in the past, but now everyone is taking them more seriously.”
Second, the damage to the telephone network caused by the attacks showed that recovery planning needs to cover not only the potential loss of data or power. Even the larger firms were surprised by the loss of connectivity, and several officials said they expect to see a lot of discussion on maintaining connections and the continuity of business activity after a disaster.
“The preparations for Y2K turned out to be very helpful, but contingency planning is about more than just recreating a piece of paper or retrieving data, it now involves electronic trading,” Nastro said. “What happens when you lose connectivity with clients? What happens when you lose T1 lines? How long does it take to restore that?”
Another question is whether the regulators should mandate minimum standards in this area. The CFTC so far has concentrated on providing short-term relief, but it will soon begin considering the longer-term implications of the disaster, particularly with respect to exchanges. The agency’s technology advisory committee, for example, plans to look at this issue at its next meeting in Chicago on Nov. 27.
Third, the crisis revealed the strength of the Internet. With telephones knocked out by the damage to Verizon’s network and cell phones jammed by the overload, exchanges and firms were forced to rely on their Web pages to communicate vital information to their staff and each other. On a more personal level, Blackberry wireless devices proved to be an invaluable communications tool, especially during the chaos immediately after the attacks. Several people told FI that the only way they could tell their colleagues outside New York that they were safe was by sending e-mail via their Blackberries.
While the discussion of what needs to be improved is important, it is equally important not to lose sight of what has already been achieved. In spite of an unprecedented disaster with horrific loss of life, the futures industry recovered astonishingly fast.
“We demonstrated that in a very difficult period, we were able to continue to provide to the customer the risk transfer system that we have to provide,” said Carr’s Varlet.
“The whole system resisted [collapse] very well in terms of payments, even if there were problems. The coordination between central banks has been very good in providing liquidity to the markets,” he added. “So it means we went through a major test of the solidity of the financial system under stress, and that at least this test was passed.”
“It is very important to show that in a difficult situation we have to be courageous, we have to show strength. And the best way to do that is to deliver the services to the customer even when the situation is difficult. For me, this message of continuity is the best answer to what happened.”