Putting the worst-case scenario to the test with real-life circumstances

Although institutional investors take calculated risks during the course of the trading day, institutions have zero tolerance for inaccuracy at the time of settlement. To mitigate risk, clearinghouses act as the intermediary between buyers and sellers to ensure each party surrenders the commodity or financial instrument promised during the trading transaction.

This London-based business is a leading independent clearinghouse that serves international exchanges. The organization’s stellar reputation helps instill investor and market confidence among its members, who venture into financial securities, exchange-traded derivatives, commodities, energy, freight, interest-rate swaps, credit-default swaps and debt repossession investments. When a trade is registered with the clearinghouse, the clearinghouse company becomes the legal counterparty to the transaction, ensuring the financial viability of the trade. With billions in transactions at stake, access to precision trading operations and analytical tools is essential to the organization’s viability. System resiliency and business continuity are priceless.

Planning for business as usual under extraordinary circumstances

Business continuity professionals are all too familiar with the need for business resiliency plans. In the 1980s and 1990s, terrorist-related incidents emphasized the value and importance of business continuity and disaster recovery plans. The clearinghouse teamed with IBM Global Technology Services – Integrated Technology Services to retain dedicated workspace available at any time for the organization’s exclusive use. The clearinghouse also secured shared workspace in case it needed additional staff members to maintain business operations. The organization’s executives designed its business continuity plan to mitigate risk, yet hoping the space would never be used for any reason beyond staff training exercises. Fate had another plan.

Tested and strengthened through a bona fide business crisis

One morning, buildings throughout the financial district where the company’s headquarters are located were rocked by a bomb detonated in an underground railway station. Three additional bombings occurred on the same day, leaving more than 50 people dead and 700 injured. Emergency plans were invoked across the city. For the company’s employees, this day provided a true test of the business continuity plan. As the news of the tragedy spread around the world, transactions within the financial markets increased at a frenetic pace. This day became one of the company’s highest trading-volume days.

When the organization invoked its resiliency services, the designated IBM recovery centers stood ready to provide support. The clearinghouse has a dedicated suite with 65 workstations and a command center within a London-based site. The highly secure, 1,080 sq ft suite has fully equipped workstations with PCs, uninterruptible power supplies, peripherals and office supplies, as well as a Bloomberg network feed to provide uninterrupted trading capabilities. In addition, the suite has generator-backup and fire-suppression capabilities, computer-controlled swipe-card security and closed-circuit television monitoring for added protection. The business also had two syndicated workspace agreements, one in London and one outside London, which provided access to 264 workstations on an equitable share basis. “On the seventh of July we moved to a recovery site located two miles away within 40 minutes, and we were up and running again in an hour and a quarter. We actually had the busiest trading day ever,” the business continuity manager for the company recalls, adding, “We worked from the dedicated and syndicated space for five days.” The clearinghouse recovered its trading operations in less than 50 percent of its established recovery time objective and avoided the potential of millions of dollars in fines. “We got kudos from our members for actually recovering. We carried on as normal,” the manager reports. “From our point of view, we upheld the company’s reputation by carrying on during the crisis.” The reputation of the business is exceptionally important because of growing competition in the market.

Exercises to keep its business continuity program fresh

In 2010, the clearinghouse extended and strengthened its agreement with IBM business continuity and resiliency services to provide additional business resiliency support. Periodic testing constitutes an integral part of the agreement. “I think you probably need to go through that sort of incident to actually have an understanding of what it's like,” the business continuity manager elaborates. “After our experience, we now run our business-critical operations from our dedicated recovery site once a quarter.” In addition, the organization runs an annual, two-day exercise involving representatives from all departments using its dedicated and syndicated space. Testing is also performed at its secondary recovery site outside London.

The IBM business continuity and resiliency services team instilled a new level of confidence in the company. “IBM provided us with the support we needed during the incident,” the business continuity manager concludes. “We can walk into our recovery site at any given moment knowing we have a plan that works.”