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Operation Topoff

Industry trade associations ramp up BCP efforts through participation in the Department of Homeland Security's simulation attack exercise.

The trade associations that are responsible for ensuring that the financial services industry is ready to respond to a terrorist attack found April's Topoff 3 test the perfect backdrop against which to test their procedures. The Topoff (Top Officials) 3 terrorist attack simulation, conducted by the U.S. Department of Homeland Security from April 4 to April 8, constituted the most comprehensive terrorism response exercise ever conducted in the United States. As the name indicates, it was the third exercise in the Topoff series, which was designed to strengthen the nation's capacity to prevent, respond to and recover from terrorist attacks involving weapons of mass destruction.

Topoff 3 simulated a biological attack in the Union and Middlesex Counties of New Jersey and a chemical attack in New London, Conn. The test involved participants from the United Kingdom and Canada, along with U.S. federal and state officials. Not to be left out, private sector agencies and organizations also took part as a critical leg in the test.

Since the financial services industry's response to and recovery from a terrorist attack is critical to ensuring homeland security and stability, the Securities Industry Association and the Bond Market Association decided to use Topoff 3 to test their crisis communications tools and techniques. Howard Sprow, assistant vice president and director of business continuity planning with the SIA, says the goal of the industry's participation in Topoff 3 was testing the industry's emergency alert systems that notify participants to convene and join a series of conference calls.

The intention of those calls - held by the SIA, BMA and other industry organizations - is to evaluate the condition of the firms on Wall Street, relate that status to regulatory bodies that would be considering early market closings or other measures to deal with a crisis, and then transmit those instructions back to the individual firms. Gathering all the appropriate people on those calls is critical to making the appropriate decisions.

"We feel that the tests were quite successful," Sprow says. "We believe that had we done this process for a real event, we would have been successfully able to coordinate the industry's response and recovery."

Room for Improvement

Though largely pleased, Sprow relates that the test revealed some incorrect phone numbers in the disaster Rolodex that need to be corrected. He estimates the amount of bad to be "well under" 5 percent. To lower that number further, Sprow says, the SIA periodically - quarterly, at a minimum - reminds the more than 300 members of the SIA's business continuity planning committee to update their contact numbers.

Additionally, Sprow says the test revealed that the process of convening the calls was "so complicated and hectic" that the SIA will be looking for ways to improve it. According to Sprow, many of the calls' participants must be on multiple conference calls during, for example, the first 24 hours of any disaster event and they need to make sure that the timing, length and sequence of calls is realistic. The result is an established "call matrix," he says. "We have, over the past few years, made a strong attempt to preschedule and sequence [the calls] so that key decision makers can participate in all the calls they need to participate in with no overlap," Sprow relates.

Contacting conference call participants is accomplished through "secure alert mechanisms," Sprow says. "They are confidential mechanisms, but they use a variety of methods to reach every individual that's involved. There are at least three methods in every case, and the call mechanisms have multiple backups," he explains. The SIA, BMA, regulatory agencies and settlement/payment entities each run different call sequences, Sprow notes.

Having the right people on those calls is critical to making a sound decision, explains Joe Sack, executive vice president of the Bond Market Association. Given the fact that many investors flock to government-backed fixed income instruments during times of trouble - "a flight to quality," he says - a decision to close the bond markets must be made carefully.

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