As the largest tenant in the World Trade Center towers, Morgan Stanley occupied about 22 floors and housed 3,700 workers in tower two and 5 World Trade Center. Amazingly, out of those 3,700 employees, Morgan Stanley had accounted for all but fewer than 10 a couple of weeks after the disaster. While Morgan Stanley has multiple office locations in Manhattan for various groups, its Dean Witter retail unit was hardest hit by the devastation.
During its third quarter earnings call, Morgan Stanley's CFO Stephen Crawford disclosed that the firm estimates about $150 million in property damage and re-location costs resulting from the World Trade Center collapse. In the immediate days and weeks following the attacks, Morgan Stanley Dean Witter put its business continuity plan to work and was able to continue with normal business operations within 24 hours. The group quickly moved operations to its three contingency facilities where about 1,500 employees were back to work, in addition to many working from home.
Temporary Office Space
Most of the Dean Witter back-office processing and trading was moved to space on Varick Street in Manhattan. A spokesman for Morgan Stanley Dean Witter says the Varick facility was previously a mostly empty warehouse space with computer equipment and processing platforms. Now the facility accommodates 750 employees set up on folding tables with workstations lined up one next to the other. While some PC workstations were in place along with major applications and servers at the Varick facility prior to the relocation, the spokesman says that a large amount of equipment was purchased after the move to replace those lost in the towers from vendors including IBM and Compaq.
Another 600 to 650 employees were relocated to another back-up facility in Harborside, N.J. with an additional 100 or so housed at the Morgan Stanley Brooklyn offices. The Brooklyn location was an existing Morgan Stanley office with about 19 floors, mainly for its IT group. Dean Witter has also placed workers in other Morgan Stanley midtown locations, while more aretelecommuting from their homes in the interim. The Dean Witter spokesman credits the group's business continuity plan and full redundancy for the successful recovery efforts.
Prime Brokerage Takes Precautions
While Morgan Stanley's Prime Brokerage Unit was safely located in midtown Manhattan, the group was quick to take precautions and partially invoke its business continuity plan. As risk manager for the division, Stuart Bohart says that with evacuations in midtown in the week following the disaster, the group is running shadow prime brokerage and stock loan operations in the Brooklyn office.
Although the prime brokerage business was not directly impacted by the events, the group has stepped up its back-up operations. "Historically we would have the BCP (business continuity plan) site ready and generally tested and we would go there every once in a while and make sureit's up and running and we can access everything," says Bohart. "Now we have people in those desks. It's nothing to be alarmed about, it's just to make sure that in a new environment we can service our clients in a manner to which they are accustomed."
The Prime Brokerage Unit is running shadow operations with full functionality, "so that we can transfer operations from midtown to Brooklyn seamlessly back and forth at a moments notice," he adds. This extra layer of protection, Bohart says, includes full redundancy of servers, desktop applications and hardware.
In terms of risk management, he explains that while no one could have expected the type of disaster and market movements that occurred, the group had planned for it. While some may have previously raised an eyebrow to stress testing for scenarios such as a 20 percent instantaneous market downturn, Bohart says that Morgan Stanely had none the less modeled market situtations similar to those following the recent events. Because the Prime Brokerage Unit had stress testing capabilities in use and previously modeled extreme market movements, the group had no significant problems with its client base in terms of margin calls.
Risk managers from the various Morgan Stanley business units take turns working out of the Brooklyn site. Staffing the Brooklyn office would ensure the transfer of functionality between the buildings. In order for a transfer to take place, a decision would be made by senior management to transfer to Brooklyn, followed by a blast e-mail to the entire client base with new phone numbers and contact information. The e-mails would be followed up with phone calls to all clients and ultimately the staff would move from N.Y. locations to other back-up facilities, particularly Brooklyn, says Bohart. Functionality can also be transferred to other Morgan Stanley offices such as in London or San Francisco.
In general, Morgan Stanley Prime Brokerage's major operations are based in New York and London, with additional operations in San Francisco, Hong Kong and Tokyo. The Tokyo and Hong Kong offices have transfer functionality similar to the midtown Manhattan/Brooklyn plan. In addition, the N.Y. office backs up the London location.
Although he isn't sure how long the staffed shadow operations will continue in Brooklyn, Bohart says it is not a short-term event. He points out that the N.Y. environment has changed following the disaster and with a different operating environment comes new precautions that might previously have seemed unlikely.
In a strange coincidence, Morgan Stanley is also nearing completion of a new building on Seventh Avenue in midtown Manhattan. The spokesman for Dean Witter says he isn't sure if the group's displaced workers would be moved to the new location and that Morgan Stanley is still working out which employees will ultimately work where.