Toledo area community credit union

The test of business continuity plans today

First, Sylvania (Ohio) Area Federal Credit Union couldn't get online to settle the day's automated teller machine (ATM) transactions. Then the lights flickered.

That's when Debbie Gerschultz, manager/treasurer of the $15 million asset credit union west of Toledo, and her staff sensed something was wrong.

It was Aug. 14, 2003, the day the power died for 50 million people from the Atlantic to the Great Lakes regions, and credit unions' business continuity plans sprang to life.

Gerschultz and her staff reacted quickly, locking the doors and shutting down the computers. "The biggest thing was, we didn't know what was happening," she says. "Was it terrorism? You just didn't know."

Within an hour, Gerschultz brought up the mainframe to back up the system. The credit union never completely lost power. Employees stayed calm and eventually learned of the widespread power outage from a television report.

Like Sylvania Area Federal, most credit unions the outage affected resumed normal operations the next day. In hindsight, the blackout-the largest in North American history-may well have been "the most convenient disaster we've ever been through," Phyllis Dahn, office manager, Garfield Community Credit Union, Garfield Heights, Ohio, told the Ohio Credit Union League.

It was an opportunity to test business continuity and disaster recovery plans and procedures. Other disasters haven't been so convenient.

NETWORKING

Postal Employees Credit Union and P&G (Procter and Gamble) Jackson Employees Federal Credit Union, both in Jackson, Tenn., were hit by tornadoes this past spring. Afterward, credit union executives looked at ways to improve their business continuity plans.

Left: Commuters walk over the Queensborough Bridge with traffic stopped in gridlock in New York, Aug. 14, 2003, during the massive blackout in the Northeastern U.S.

The branch of Postal Employees lost electricity and later flooded, forcing branch personnel to work at the main office for 10 days, according to Manager Patsy Alphin Brockenbrough. Additional problems for the $23 million asset credit union arose with an ATM located at the destroyed main post office. Its cash had to be retrieved as soon as possible. The credit union still is trying to relocate the machine.

For future contingency planning, Alphin Brockenbrough says, "We've seen the need to have a set of keys for each office at an off-site location and will update our off-site telephone list with numbers for board and staff, including cell phone numbers." She says the credit union's chapter meetings provide an excellent networking forum for plan improvement.

Like Postal Employees, P&G Jackson Employees Federal never really tested its plan before being hit with a tornado. "I don't think any plan will work entirely," reflects Manager Karen Jordan. P&G Jackson Employees Federal, an on-site credit union, sustained damage along with its sponsor company, whose roof was torn off. Help from local Resource Federal Credit Union with data recovery and the credit union's sponsor has aided the recovery effort.

"Our sponsor [P&G] received extensive damage and is rebuilding with ample space for us. It helped us by getting our new phone number and location out to everyone through a toll-free number," Jordan says. In the future, she plans to have phone numbers and other valuable information at several different locations because the credit union currently has no branches.

Both Alphin Brockenbrough and Jordan appreciated the help they received from sources inside and outside of the credit union movement, including other local credit unions, the league, and insurer CUNA Mutual Group, Madison, Wis. But how much can a credit union rely on others, given that a disaster may strike several credit unions, power sources, or backup data recovery firms in the same region? It's wise to have alternative backup options within your plan.

HIDDEN COSTS OF NOT TESTING

It's not enough to review the business continuity plan on paper. You must test and revise it in practice. Otherwise, unanticipated glitches can occur during a crisis. The pressure explodes on a small number of people, and critical, time-sensitive decisions must be made right away, according to CUNA Mutual's Mike Retelle, an expert in disaster recovery planning and claims.

"Suddenly, your insurance provider is on the scene and ready to help, but people want to wait and have a meeting," he says. "Second-guessing and lack of consensus are no good when you need to determine how many branches to keep open and how to redirect members so they can transact business with the least amount of trouble."

Retelle says testing and updating are the most ignored stages of business continuity planning. "People maybe test once a year, if that," he says. "What can happen in a year? Your CEO could change, your facilities manager could change, your charter, your sponsor, the number of branches you have, your asset level, your infrastructure. Any of those could change and have a major impact on your plan."

Whenever such changes occur, update your plan. Testing or loss simulations can occur prior to tornado season, hurricane season, and so forth. Based on realistic scenarios, suspend key systems and see how well the plan kicks in, document the findings, and then make improvements.

What if you turned off the power? How do people react in the dark? Remember, there's no air conditioning, no computers, maybe no phones. Are your data backed up? Are critical documents and items secure? How do you provide services with no power (and maybe no branches or other credit unions) to rely on?

Retelle says it's important to look at how business partners will respond to your loss situation and the ability of law enforcement, fire department, and other local authorities to address your needs. The National Credit Union Administration (NCUA) cautions that multiple scenarios can occur simultaneously during a crisis, so be prepared.

Involve everyone-from employees to the board-in routine testing to reduce risk of failure and to share responsibility. Sometimes, when a disaster or other crisis emerges, the board may shift blame/responsibility for recovery onto the CEO and/or a small recovery team. Those people are under pressure to deliver, and they usually do, notes Retelle.

However, those personnel may burn out and switch to outside jobs within two years. "Turnover is a hidden cost," he adds.

Retelle believes board members should understand they have the ultimate responsibility for a successful recovery and should be prepared, once a crisis occurs, to support the credit union.

But what if board members are heavily involved in the recovery of the sponsor company? "I felt a lot of personal pressure because my board members were involved with their jobs at the plant," says P&G Jackson Employees Federal's Jordan. They were working 12 to 16 hours a day, and I never saw them during the move. I can't say enough about my employees. We worked our eight hours at the office and then went to the plant, put on hard hats and safety glasses, and walked through three inches of water."

TOTAL RECOVERY

Your contingency plan should be detailed enough to facilitate starting over from scratch, including relocation.

Such was the case of StarTrust Federal Credit Union in Houston, the former credit union of failed energy-giant Enron. StarTrust Federal CEO Jack McAdoo says the credit union had a "starting over" scenario in its plan as of 2000, one of several scenarios created with management consulting firm Decision Strategies International Inc., West Conshohocken, Pa. Initially given a low priority, the scenario was upgraded slightly after September 2001.

Then in December 2001, things changed radically. Enron's stock was downgraded. The company declared bankruptcy and laid off 4,000 workers. At a time when most people were shell-shocked, the plan allowed the board to meet and move expeditiously toward starting over.

Luckily, the credit union's finances weren't in immediate trouble. McAdoo and his staff always had maintained a strong balance sheet in terms of capital and liquidity. The credit union further increased liquidity in reaction to Enron's charging up its credit lines as a possible precursor to bankruptcy. (McAdoo credits his experience in commercial lending with tipping him off to this critical warning sign.)

The real challenge lay in convincing members and the public that the credit union was an independent financial entity. The contingency plan aided the management team in staying focused, taking quick corrective action, and staying on message with members and the general public. "We kept repeating over and over that the credit union was going to survive and be there for them," says McAdoo.