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May 2003
Recover from a Disaster or Risk Customer Attrition

September 11th reminded us we need to be prepared for a myriad of disasters large and small. While customers can sympathize with a general disaster, it may be harder to prevent customer attrition when you're: the last institution back up and running, the only one affected, or unable to serve customers because of lack of forethought and planning.

In a February 2003 report the GAO identified a lack of preparedness that goes beyond terrorist threats. "...The attacks revealed the need to improve business continuity capabilities to address future disasters. At the time of the attacks, some market participants lacked backup facilities to which they could relocate their operations; others had backup facilities but they were located too close to their primary sites and were also inaccessible. Some organizations' backup sites were not large enough or did not have the equipment or software needed for critical operations. Many organizations also found that the arrangements they had made for backup telecommunications service were inadequate. ...Although many ... attempted to reduce their risks by testing their risk reduction measures, GAO found that few organizations had tested their physical security measures, and about half had tested their business continuity capabilities and key information systems protections."

While the probability that fire, flood, terrorist attack, disgruntled employee attack or another disaster will in some way strike is remote, as officers of the company, you are responsible for taking all prudent measures to ensure effective continuity of the business. And that means having a well thought out disaster recovery and business continuity plan. September 11th also pointed out that the time horizon covered by the recovery plan might need to be longer in duration than previously thought.

What should such a plan entail? First, for each possible loss (operations center, data center, communications, etc.) assess the impact on the business and set priorities for recovery - not everything is of equal importance. Certain elements of operations are critical; others are not. Some systems are more vital to be up and running sooner than others. Having an idea of how long an outage will impact the business provides a good guideline for how much to invest in backup and recovery facilities. Do you have a source for office space lined up in case of emergency, or can employees work from home with cell phones and perhaps e-mail for several days? If your building is totally destroyed are you aware of potential alternate locations or do you at least have a relationship with a leasing agent? Systematically think through each possible situation, assess the risk to the business, and determine the appropriate recovery scenario.

Planning for recovery of information systems is a specialized effort that requires evaluation of all infrastructure (mainframes, servers, PCs, networks, etc.) and applications, including ATMs, e-mail, and Internet based systems. Set up a classification to identify Class 1 systems that need to be recovered within 0-4 hours, Class 2 within 4-24 hours, Class 3 within 24-72 hours, etc. Then plan recovery for each class of system, e.g., Class 1 will require hot standby or mirrored systems, Class 2 will require available space and equipment, plus backup of all data files at least daily, etc. Many firms contract with their equipment suppliers and specialized disaster recovery firms to provide space, equipment, telephone lines, and other services. You may want to consider expanding beyond local suppliers if your major threats are geographically based (e.g., weather). Alternate suppliers of equipment should also be on your list of potential contractors. Other contractors to pre-identify and even establish open contracts with include firms specializing in: water removal, building repair, electrical and plumbing work, furniture, etc.

The most important thing about a disaster recovery plan is that it be tested - an untested plan is no plan at all! Only by actually testing portions of the plan can you be sure all the pieces are in place. How do employees find out what is happening and what they should do? How do customers get periodic information on when normal operations will resume? Are the servers and operating systems at the backup site exactly the right ones needed to run your systems?

Not everything will go "according to plan" if a disaster does strike. But having a comprehensive, tested, disaster recovery and business continuity plan in place will ensure that management has taken the prudent, appropriate steps to safeguard the business. — Bob Curtice and Lisa Bendixen


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