Looking back at the August 14 blackout in the Eastern U.S. and parts of Canada, it's evident that the disaster recovery plans at financial institutions worked precisely as intended. But there's still room for improvement in business continuity. What's the difference? Disaster recovery is bouncing back after an adverse event, while business continuity is not stumbling in the first place.
For the industry as a whole, critical elements of the payments infrastructure were largely unaffected by the regional blackout. Systems including ATM networks, credit card networks, the automated clearinghouse, Federal Reserve networks, and inter-bank communications networks such as SWIFT (See Executive Q&A, page 37) proved their resilience. As a result, customers and institutions outside of the affected areas were largely unaffected as a result of the blackout. That is, unless someone's trading partner, customer, or account manager was walking the streets of Manhattan, Toronto, or elsewhere looking for a way home.
Within the affected areas, ATM screens went dark and most branches closed. That's standard operating procedure during a blackout, since many security measures at bank branches and ATM lobbies are dependent upon power supplies. Having said that, if a blackout were to stretch into a several-day period, banks have procedures in place for that as well. "If it had been a more extended period, banks would have had to go into yet another backup," says John Hall, media relations for the American Bankers Association (Washington, D.C.). "Banks could even go manual, if they had to."
Bankers have learned a few lessons from the blackout, says Hall. First, don't count on having a working cell phone. Not only did many people run out of battery power, but in many cases the cell phone transmission towers did not have sufficient energy to operate at full strength, if at all. But the text messaging functionality of cell phones, pagers and portable e-mail terminals such as the Blackberry did come in handy. That's because it's much easier to squeeze a text message than a voice call through limited available bandwidth. Still, not all messages went through immediately. "There can be improvements on communications during an event like this," says Hall.
Indeed, banks have learned lessons about how to create redundancy for all manner of technological innovations. "Something as simple of a stash of flashlights can be helpful," says Hall. "Every event helps you refine your disaster recovery procedures."