Disaster planning saves Wall Street

Financial giants have been forced to desert Wall Street

The world's biggest and most sophisticated financial market is re-opening for business on Monday morning, less than a week after terrorist attacks devastated the heart of Manhattan.

The fact that the turnaround has been so slick - at least as far as major financial institutions are concerned - is the result of intense planning on disaster recovery techniques.

Quite a number [of firms] will have lost everything, and may not survive as businesses

Stephen Bean, Guardian IT

Almost all financial firms will have had a sophisticated contingency plan in place for an interruption to their operations.

But experts warn that many smaller firms may not have made provisions, and could go out of business as a result.

Planning for the worst

Over the last few years, disaster recovery has become refined to an art-form among financial institutions.

Banks cannot afford to lose several days' trading

As investment banking has become ever more driven by telecoms and technology, it has also become more vulnerable to unexpected outages.

The giants of the financial world, which now trade around the clock, responding second-by-second to client demand and breaking news, cannot afford to be off-line even for hours, let alone days or weeks.

So most bigger firms have permanent disaster-recovery teams in-house, creating in the process the profession of "business continuity manager".

Others contract out contingency planning to the growing number of specialised firms such as Comdisco in the US, or Britain's Guardian IT.

Doubling up

At their most sophisticated, corporate disaster recovery plans involve a near-replica of the company's office, with desk space for the most crucial employees permanently ready for use at a few hours' notice.

This places huge demands on technology, since a firm's computer system must be permanently backed up, so that the failure even of the main server will not result in the loss of a single piece of data.

No major financial institution has all its operations - whether staff or technology - based in one place.

Morgan Stanley, the financial firm most severely affected by the attack, says it will be ready for the opening of trading on Monday, thanks to having spread its New York operations around the city.

Most other large financial companies based around the World Trade Center - notably Lehman Brothers, Merrill Lynch and Cantor Fitzgerald - are in the process of shifting operations to other existing offices.

Present and correct

No significant firm has yet said it will be unable to begin trading on Monday morning.

The rapid recovery of the stock exchanges was the result of having computer systems backed up in more than one location.

Such preparation is not limited to the finance sector.

Cleary, Gottlieb, Steen & Hamilton, a law firm based at One Liberty Plaza, just across the road from the World Trade Center, said that disaster planning allowed it to shift operations to its mid-town conference centre.

"Our e-mail, voice-mail, word processing and other support services will have been restored for our New York staff within 48 hours of [Tuesday's] evacuation of One Liberty," said Peter Karasz, the firm's managing partner, said.

Cheaper alternative

But complex disaster recovery is hugely expensive.

The Bishopsgate bomb was the last major attack on a financial centre

A cheaper, and increasingly popular, alternative is to contract out the work to a third party - in most cases, a software systems firm.

Guardian IT, for example, operates 40 recovery centres around Europe, in which clients buy office space - anything from four desks upwards.

Computer and telecoms systems are co-ordinated with the client's, so that a firm moving in will find phone numbers, e-mail and even screen layouts unchanged from their original office.

Although most bigger companies tend to manage these operations in-house, some of the biggest names in the business are using contractors.

Salomon Smith Barney, the investment banking and brokerage arm of Citigroup, which has operations in downtown Manhattan, is reportedly moving to a disaster recovery site in New Jersey.

Boost awaited

The business is growing rapidly, and is expected to get a further boost as companies digest the latest events.

London's Docklands have been targeted by terrorists

Guardian IT's shares have bounced from 260p at the beginning of the week to close at 345p on Thursday.

Stephen Bean, Guardian IT marketing director, told BBC News Online that the UK market is most highly developed, as British firms have learned to live with the threat of terrorist attacks.

Guardian IT helped institutions restore operations after the 1993 bombing of Bishopsgate in the City of London, the last time a major financial centre was disrupted by a terrorist attack.

Canary Wharf, the London Docklands district that is home to a growing number of financial firms, has also been targeted by terrorists.

Overseas expansion

But outside the UK, the disaster recovery market is less developed, Mr Bean said.

Guardian IT is seeing substantial growth in continental Europe, and has been considering opening an operation in New Jersey for some time.

And while the financial giants have carefully-prepared programmes, Mr Bean warned that coverage will have been far from universal.

"Many smaller businesses will not have had plans," he said.

"Quite a number will have lost everything, and may not survive as businesses."

Mundane threats

Although firms such as Guardian IT are anticipating a flood of new business in the wake of the World Trade Center attack, they are keen to stress that terrorism is usually bottom of the list of corporate threats.

Of the 80 occasions on which Guardian IT customers invoked its services last year, there was one fire, one flood, one theft, and no terrorism.

All the other events were mundane-seeming emergencies, such as air-conditioning failures, power cuts and software disruption.

"Companies always think about fires, floods and explosions," said Mr Bean.

"But in reality, most experiences of disaster occur for very different reasons."