By Hilary Kabak
How to keep going in an all-systems-stop (or even some systems) environment.
Last year it was the weather. This year it’s revolution (and, frankly, still the weather). The number of events that can derail even the smoothest of treasury operations should lead any prudent organization to examine its contingency plans.
According to a NeuGroup 2013 Global Cash and Banking Group (GCBG) pre-meeting survey, 45 percent of respondents did not have a formally documented contingency plan. There was no shortage of examples then and now in today’s turmoil in Ukraine and Venezuela, two places where they might be useful.
Developing a contingency plan involves making decisions in advance about the management of human and financial resources in case of an emergency, as well as the coordination and communication procedures to be followed. While there will always be some surprises, mitigating their fall-out is at least partly achievable with some thoughtful planning, as some of our well-prepared and storm-struck members demonstrated. Strategies ranging from geographic variation to in-person banking can make themselves invaluable just when more companies are switching to cloud storage and automated financial services.
One way to make the task of imagining all of the terrible things that can happen to your operations and how you might handle them more manageable is to break it into parts. This strategy is demonstrated by a company with a detailed plan broken into three parts:
1. Risk management plan. This plan outlines the tasks and responsibilities to support and maintain business continuity before a disruption occurs. It is helpful to create a checklist chart of what everyone is responsible for on a daily basis. Ensure that treasury and bank contact information, passwords and bank certificates are all up to date, and take laptops and bank tokens home daily. Some companies furnish senior employees with second laptops specifically for this purpose.
2. Business contingency plan. This component provides alternative methods of performing critical treasury processes in the event of a disruption. This begins with team brainstorming of all possible scenarios that might arise, and laying out step-by-step processes to accomplish tasks when normal channels fail.
This plan should be detailed enough to provide step-by-step instructions for each task in the event that someone unfamiliar with the process has to execute the steps. It may also include manual processes in case online systems are not available, although hotspots (preferably from two providers) and back-up servers are worth the investment.
3. Emergency response plan. The final aspect of the overall contingency plan outlines the tasks and responsibilities that must be addressed at the time of the disaster. Creating this plan requires assigning critical tasks and responsibilities, and developing a channel of communication that will be used once the disaster has occurred.
A call-tree detailing contact names, phone numbers and emails, along with the proper communication flow (who calls whom), is critical. This document should be kept in a location that is likely to be accessible even in the event of a disaster (cloud-based, off-site, etc.).
Get granular
Disasters rarely announce their intentions beforehand, so it’s up to you to predict what might go wrong, who is best to fix it and how it is likely to be accomplished. Contingency plans should have a variety of scenarios with varying degrees of severity, from the lowest level of not being able to access online banking systems, to the highest level of having a full power outage with no access to anything; external banking systems, internal IT systems, and intranet.
One member who does this type of planning recommended that each scenario have a separate contingency strategy following the “if this/then do that” form of logic. If internal systems are down, where is the backup server, and how long will it take to get it back online? If all of your local signatories are unavailable, who else can authorize wires, and how will they be alerted?
There is no such thing as too much detail when trying to initiate a speedy and effective emergency response. Make a chart detailing potential problems, their likelihood, who should be responsible for them, and what this person’s or team’s plan of action should be. This will serve as your primary reference tool if you need to use your contingency plan.
The process can take a significant amount of time, but based on member feedback, is invaluable in the unlikely event of a catastrophe.
Your bank is your friend
With all of the moving parts in regular operations that have to be rethought in crisis mode, banks can be very accommodating. One Super Storm Sandy-scarred GCBG member recalled banks being very helpful in making sure money moved as it needed to, with payment initiations being done over the phone and manually, and payroll accounts being pre-funded.
Another member said that their bank allowed them to duplicate payroll files from the previous period when new ones could not be made, and another was actually allowed to open their previous file in the bank’s system in order to re-initiate payments from it. During a crisis, yield is not the concern; it becomes a matter of getting things done by whatever means necessary, and banks understand this. A word of caution: while these strategies can be a lifeline, you will need to keep your MIFT (manual initiation funds transfer) up to date; otherwise the bank won’t be able to help you.