Business Continuity Plan: Pandemic Preparedness

In accordance with FINRA Rule 4370 (Business Continuity Plans and Emergency Contact Information), a broker-dealer must have a business continuity plan addressing numerous elements, one of which is financial and operational assessments. This element requires the broker-dealer to assess the operational and other risks related to a significant business disruption, such as a pandemic. Public health officials report that the Zika virus, an infectious disease transmitted by mosquitoes, has reached the continental United States and is being locally transmitted in southern states. Now would be a good time for broker-dealers and other financial institutions to assess the adequacy of their business continuity plans for dealing with local or widespread outbreaks of the Zika virus and other infectious diseases. We provide some general guidance on pandemic planning. For specific information about the Zika virus or any other infectious disease, you should go to the website of the Centers for Disease Control and Prevention (CDC).

Risk Analysis

As part of its business continuity plan, a firm should regularly conduct its own operational risk analysis to determine its vulnerability to various types of business disruptions, such as a pandemic, hurricane, earthquake, flood, or cyber attack. A pandemic is, by definition, an outbreak of a disease over a wide geographic area. This means that all firms are susceptible in some way to this type of business disruption. However, the extent to which a particular firm needs to prepare for a pandemic depends on relevant factors, such as the size of the firm, the nature of its business, and its relationships with clients, counterparties, and service providers.

Potential Issues Arising from a Pandemic

A pandemic has the potential to be a significant business disruption. A firm should anticipate business challenges in these areas:

  • Absenteeism;
  • Telecommunications disruptions;
  • Remote work arrangements;
  • Commuting;
  • Provision of customer service;
  • Transportation;
  • Trade clearance and settlement;
  • Counterparties;
  • Market volatility;
  • Regulatory filings;
  • Power disruptions; and
  • Access to online accounts.

Pandemic Plan

A firm’s response to a pandemic may include these actions designed to minimize the spread of the disease:

  • implementing social distancing policies and capabilities;
  • distributing hygiene products (for example, hand sanitizers, masks, gloves);
  • sanitizing and disinfecting facilities;
  • using communication channels to disseminate important health and safety information and to calm employee and customer concerns;
  • restricting travel;
  • adhering to CDC recommendations on quarantines;
  • minimizing or eliminating group meetings;
  • using remote meeting and conference call capabilities;
  • reassessing human resource policies;
  • testing information technology (IT) and remote work capabilities; and
  • increasing allowable sick time and encouraging employees to use such time.

Concluding Thoughts

The Zika virus does not appear to present the same level of operational risks as recent pandemics in the United States, such as the H1N1 flu virus (swine flu) that spread across the globe in 2009. Nonetheless, we encourage each firm to perform its own risk assessment. We urge those firms that have yet to incorporate pandemic planning into their business continuity plan to consider the value of being prepared to respond to a local or widespread outbreak of an infectious disease. After all, a poor response to an outbreak of a serious disease could jeopardize not only the continuity of your firm’s business, but also the health and lives of your staff and other individuals.

For more posts regarding a Business Continuity Plan, please see Business Continuity-Weather-Related Events, Business Continuity and Transition Plan for RIAs, and Loss of Key Personnel: How to Prepare.

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