Moments after the first plane crashed into the first World Trade Center tower Tuesday morning, an astounding amount of paper floated in the air throughout lower Manhattan.
As many watched the sight of what looked like confetti in a ticker-tape parade, the deceptively peaceful sight caused many to mistakenly remain in their offices when they should have been fleeing the horrific carnage and destruction that were about to descend upon them.
But that tonnage of paper had more significance than just fooling those who hadn't already fled. Given the number of financial services companies that were located in the World Trade Center, many of those thousands of sheaths of paper likely contained critical financial records that only existed in hard-copy form -- and they may now be lost forever.
Joe Flach, a vice president with Eagle Rock Alliance, a disaster-recovery consulting firm, has clients that were housed in the World Trade Center. While declining to name those clients, Flach says they should emerge from this incredible disaster with no loss of company records because they backed up all mission-critical data in real time to offsite disaster-recovery sites.
Others, however, may not be so lucky. The only records of many customer transactions, Flach says, were likely decimated in the World Trade Center on the fateful morning of Sept. 11, 2001.
TSC: Do you have clients that had the misfortune of being in the WorldTrade Center, and if so, how are they doing?
Yes, but I cannot divulge their names. We work with 12 active clients, most of them Fortune 100 financial service firms. I can tell you that they have backed up their critical technology either to other company facilities or third-party vendors such as
TSC: While major financial firms have been backing up mission-critical records in real time for the past decade, many companies are still clearly reliant on paper, as evidenced by the avalanche of paper that littered the sky Tuesday morning. What kinds of information might have resided only in paper form or not have made it into backup systems?
There are some company-vital records that typically are not computer-resident. Some of those papers in the sky might have been contracts, payment instructions, trading tickets, trading blotters, stock certificates or bonds. Most corporate-critical vital records are computer-resident and are backed up in real time, but there is still a lot of paper-intensive work on Wall Street that doesn't get inputted into computers, let alone backed up into other systems. Some of the traders have embraced technology while others have relied on handwritten tickets.
TSC: Is there danger to individual or institutional investors, then, that trades or other transactions they made Monday or Tuesday were not properly recorded?
As far as a client's full account portfolio, I am confident that all information as of Sept. 10 was recorded intact. But what potentially may have been impacted would be any transaction that took place that morning.
TSC: But isn't it an SEC requirement to back up all vital customer information?
Yes, that is a requirement, but the regulations are somewhat ambiguous, and oftentimes front-office trading information is paper-based and is not backed up until it reaches the clearing and settlement stage in the back office.
I would feel very comfortable in saying that information captured the previous business day made most companies' archives, but some information on the day of the blast may have been lost.
TSC: This doesn't seem to make sense in light of the 1993 bombing at the World Trade Center. Wasn't that enough of a wake-up call to companies that they needed to back up all records, including those in the front office or those that are typically paper-based?
Since the 1993 bombing, companies have been more proactive. But there are lapses in all programs. Most of the financial powerhouses have mature, well-tested and well-rehearsed recovery programs. But some of your smaller brokerage firms may not have been as proactive.
I expect the majority of the companies that were in the World Trade Center were well prepared. I am confident that the
will come out of this solvent, but there will be a couple of casualties. Without a doubt, there are going to be problems, interruptions and some lost data. There will be some companies that will no longer be in business as we know them.
TSC: What about Y2K? Wouldn't that have prompted even the smaller firms to be more impeccable with their files?
Unfortunately, Y2K was more about planning for a component failure, not for a full facility outage of data.
TSC: Did you or any of your clients ever expect a disaster of this magnitude?
No one dreamed possible the extent of this destruction. There was a lot of security guarding against a more containable suicide attack by a van. Who could have guessed there would be a kamikaze attack out of the sky that could obliterate the entire World Trade Center?
But we're already trying to get businesses back into business. Within two hours of the attack, we began looking for office space to relocate our clients and have already found 5 million square feet of available office space in the New Jersey-Connecticut area. We are looking for short-term leases of a year or less.
While many of these companies have offsite disaster-recovery sites well equipped with fully loaded trading floors, these companies are going to need a lot of space. Most companies only plan for disaster-recovery sites equaling 25% of their occupancy level. Now we are talking about replacing over 300 floors' worth of business: 110 floors in each World Trade Center and more than 40 in No. 7.
And besides those buildings that have collapsed, there are buildings that are not going to be
able to be reoccupied. I can't even begin to estimate the square footage that will be needed.
TSC: And what about the telephone lines? We tried, unsuccessfully, to reachMerrill Lynch and OppenheimerFunds on Monday.
Voice recovery is a key component in business continuity plans. They have to make arrangements ahead of time to have calls rerouted to what is called a point of preference or a central office, so that phones are rerouted from the disaster site to the recovery site. If a company was smart enough to have a disaster-recovery site, they undoubtedly have taken care of their phone lines. It's possible the trouble was the sheer capacity.
TSC: Have any companies told you that under no circumstances do they want to return to the Wall Street area?
So far, none of our clients are telling us they don't want to remain in the Financial District.