Despite the devastating loss of life in the September 11th attacks on America, technology helped the financial services industry to weather the storm intact.
"It's very hard to find anything that did not work," said Damon Kovelsky, an analyst at Meridien Research, Newton, Mass. "The backups, the redundancies--all that worked. It worked like a charm."
Although bandwidth shortages in the downtown New York City area led to some banks having difficulty settling trades, the trades didn't fail. "They just had a hard time getting into BoNY's Bank of New York settlement systems," said Kovelsky. "They were going in in batches--so it would be quiet for a while and then all of a sudden there'd be this huge batch of settlement data and it would just start chugging away."
Banks' information systems were also robust enough to handle the halt in trading across the entire market. Even with an unprecedented four-day halt in trading, the system deftly handled the absence of information as it would if a quickly-declining stock halted trading. "They are designed to deal with circuit breakers because it's a fact of life ever since the '87 crash," said Kovelsky.
There are still some nuts-and-bolts issues when it comes to dealing with risk management systems that expect a certain number of expected trading days per year. "There will be a lot of work that'll have to be done along those lines," said Randi Purchia, an analyst with AMR Research, Boston, Mass. "But in the immediate- to short-term, you're going to see people using the old expert information system that resides in experienced senior management."
But for the most part, banks' systems are intact and performing well. "The foundation of data was secure, and disaster recovery plans had worked even for one institution, which in particular, had been pretty badly hit," said Purchia, who declined to name the company. "All their systems were up and running, which was remarkable given who they were."
Longer term, the attack provided a wake-up call to the rest of the industry as to the importance of adequate backup facilities. "Insuring complete redundancy of your data is not something that can be done on the cheap," said Kovelsky. "It can be expensive, especially when you don't have economies of scale."
Data backup and security also is important, Kovelsky added. "Don't underestimate how important it is," he said. "If you never use it, you're lucky."