In the aftermath of the US bombings, much has been said and written about the security of electronic records and information by financial organisations formerly housed in the World Trade Centre.
Notwithstanding the significant loss of intellectual capital, it is likely that vital financial data has also been lost on a grand scale.
Brokers and dealers who used the WTC no doubt kept most of their electronic records there. It is possible, indeed likely, that the data handling of many large operators was outsourced or collocated off site. But for smaller operators it is less likely.
Settlement of financial transactions requires that all parties settle and that proof of settlement be available. The possibility that countless financial transactions were only partially settled cannot be ignored, incomplete financial transactions that are unverifiable.
This represents not only the risk of lack of proof, but also the risk of parties to the deal reneging on the basis that the transaction was not completed. The concept of non-repudiation will be tested. Given the dramatic changes to the economic status quo it may well suit participants, bent on survival, to back out of financial transactions that are no longer attractive on the basis that they are unverifiable. (Within two days of the attack, companies, concerned about survival, were already laying off staff as they adopted a cautious take on the economic uncertainties. And the layoffs continue to accelerate.)
Can we learn from this? We can learn that disaster can strike at any time and if we are not prepared, the consequences can be extreme. Also that financial transactions have a discrete life of their own and that they must be completed and verifiable to be enforced.
One might question how many traders used some form of Straight Through Processing. Was it electronic and therefore verifiable, or was it manual, incomplete and unverifiable at the moment of impact?
The cost of a disaster on this scale cannot be measured in days and weeks, but in months and years. It will be many months before we begin to get a realistic view of the cost, if we ever do. Organisations will have been wiped out totally, others so badly damaged that they will not recover and others still will be very reticent to reveal the extent of their vulnerability - financial transacting is based on certainty and confidence.
There will be considerable activity to shore up weak financial transaction systems. Solution suppliers will be at the forefront of the drive to tighten up the processes, service suppliers who can accelerate interest in business process outsourcing.
In the meantime, service providers who can illustrate that they offer a viable extension of their customers' IT organisations in the face of increased uncertainty should find their customers ready to discuss partnership. We can expect to see a shift from backup performance towards recovery performance, emphasising the relationship between recovery performance and the criticality of corporate data and applications.
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