City resilient, but 'could do better'

More than 60 key companies, including investment banks and traders, recently took part in a study to measure how the financial sector would be affected by a major disruption. The 'Tripartite Authorities' - HM Treasury, the Financial Services Authority (FSA) and the Bank of England - published the results this week.

The report concluded that those firms and financial infrastructure providers which represented the core of the financial system had "highly resilient IT systems and could recover critical functions rapidly following major operational disruption."

However, it also suggested that were often too inward-looking and planning did not involve the third parties, such as telecommunications providers, that they relied upon.

Hector Sants, managing director of the FSA's wholesale firms division, said: "Several participants have described this exercise as very helpful in terms of improving business continuity teams' understanding of their firms' critical business functions.

"This is a welcome development but highlights that firms need to do more to ensure that business continuity staff are sufficiently aware of the functions they are supporting."

City centred

The internet-based survey was launched in July 2004 and focused on key financial sector companies such as those involved in wholesale payments, trade clearing and settlements. According to the responses the bulk of critical financial infrastructure could be recovered within two hours.

However "a few" firms were not able to recover quickly and these companies would be given help to get systems in place, the FSA said.

The 60 organisations together reported having almost 400 buildings where critical parts of business were carried out - with more than 75% of them within a 5km radius of the heart of the City.

The report also revealed a high degree of reliance on key providers of telecommunications facilities and on providers of disaster recovery facilities. These were issues the authorities would be "taking forward" with participants and the relevant third parties.

Over a third of the organisations said they did not think their operations would be affected by an attack on London as they had outlying offices that work could be switched to, meaning an attack on the City would not have much impact on them.

No enforcement

The FSA said it was satisfied there was no need to enforce rules on managing business continuity, but said it would continue to monitor the situation closely.

Mr Sants added: "It is encouraging that the project has established that the core parts of the financial system appear to have highly resilient IT systems that allow them to recover critical functions with impressive speed.

"This stands the sector as a whole in good stead and confirms to us that we do not, at this stage, need to write detailed rules telling firms what business continuity arrangements they should adopt."

Last month a financial sector continuity event simulated a series of bombs at key financial sites around the City of London and Canary Wharf.

More than 1,000 people from over 80 organisations took part in the desk-based exercise which also involved bodies such as the police, City of London Corporation, Canary Wharf management and the London Resilience Team. KPMG will report early next year on how well the financial sector is equipped to deal with such a crisis.