Major U.S. financial institutions got a grim reminder Sunday of their exposure to possible terrorist attacks, but one consultant on Monday said the industry should get high marks for its efforts to prepare for potential cataclysms.
"As an industry, the financial services community is far and away the best prepared to withstand business interruption events caused by terrorist attacks or any other kind of disaster than any other industry in corporate America," said Joe Flach, vice president of Eagle Rock Alliance Ltd., a consulting firm that has helped Wall Street companies plan for big disruptions.
On Sunday, U.S. Homeland Security Secretary Tom Ridge put New York, Washington and other financial centers on a high alert for attack.
The warning was unusually specific, citing buildings of the World Bank and International Monetary Fund in Washington the New York Stock Exchange and Citigroup Inc. in New York and insurer Prudential Financial Inc. in New Jersey as being at risk from truck bombs or suicide bombers.
Flach and other experts said financial companies and government institutions had long made business continuity a top priority, developing backup systems to ensure that their operations could continue to function in the event of a disaster at a principal site.
Backup planning was accelerated after the Sept. 11, 2001, terrorist attacks, analysts say.
The Nasdaq Stock Market, for example, has data centers that are 300 miles apart and tests backup diesel generators for those sites weekly.
Since Sept. 11, the NYSE has spent roughly $25 million on a backup trading facility. The exchange closed for four days after the 2001 attacks, mainly to avoid hindering rescue operations nearby.
Investment bank Lehman Bros. Holdings Inc. still maintains a fully equipped building in Jersey City, N.J., that it used as a temporary headquarters after the attacks of Sept. 11.
In May, the Securities Industry Assn. and the Bond Market Assn. held an exercise involving 13 brokerages. During the drill, one scenario included two hypothetical explosions in Manhattan.
The Government Accountability Office, the investigative arm of the U.S. Congress, is working on an update to a lengthy 2003 report entitled "Potential Terrorist Attacks: Additional Actions Needed to Better Prepare Critical Financial Market Participants."
The update reviews the preparedness of major financial institutions and brokerages, and is expected to be issued this fall, according to Davi D'Agostino, a GAO director.
D'Agostino declined to comment on the report's findings.