One of the elements of FINRA's BCP rule (Rule 4370) is a financial and operational assessment. This element requires firms to consider operational risk exposure to relevant threats, including a pandemic. Firms need to be prepared for the possible effects of a pandemic, which may include absenteeism, school closings, transportation difficulties and telecommunications slowdowns. Pandemic influenza also may have the ability to impact a geographically diverse area.
In 2009 FINRA conducted a voluntary firm survey to determine preparedness for a pandemic in light of current events involving influenza A (H1N1). This survey is part of FINRA's effort to assist firms with business continuity planning by facilitating the exchange of information. See Regulatory Notice 09-59 for pandemic planning best practices based on the results of this survey. FINRA conducted a similar survey following Hurricanes Katrina and Rita in 2005, resulting in NTM 06-74, which provides valuable, real-world insight into the effectiveness of planning and implementing a BCP.
We received responses from 109 firms. The survey results show that for those firms responding:
While the results are generally positive, there remains work to be done for firms to be better prepared for a pandemic. For example, one in five firms did not yet test their pandemic plans. Testing the plan to some extent is an important part of preparation. FINRA examiners are assessing firms' BCPs, looking at how they have taken a possible pandemic into account in their BCPs.
Below is a summary of the aggregate survey results.
|Summary of Results|
|1. Has your firm conducted a review of the potential impact of a pandemic?||Yes||97%|
|2. Does your firm have a business continuity plan specifically addressing a pandemic?||Yes||94%|
|3. If your firm has a specific pandemic plan, has your firm tested the plan?||Yes||80%|
|4. If your firm has tested its pandemic plan, how did the firm perform such tests?||FSSCC* Pandemic Exercise||41%|
|5. Considering current events involving influenza A (H1N1), a/k/a "swine flu," have any portions of your firm's pandemic plan been triggered?||Yes||61%|
|6. If any portions of your firm's pandemic plan have been triggered, what were the trigger points?||WHO Declaration of Pandemic Phase 4||27%|
|WHO Declaration of Pandemic Phase 5||4%|
|WHO Declaration of Pandemic Phase 6||18%|
|U.S. Federal Declaration of Public Health Emergency||7%|
|7. If any portions of your firm's pandemic plan have been triggered, what actions or protocols have been activated?||(free text responses)|
|8. If any portions of your firm's pandemic plan have been triggered, how have these areas of the plan been working?
(Select 1 to 5, where 1 means the plan is working poorly and 5 means the plan is working very well.)
|9. Has your firm experienced above-average absenteeism?||Yes||4%|
|10. Please describe what your firm believes would be your most significant challenges in the event of a pandemic.||Absenteeism||25%|
|Access to online accounts||1%|
|Provision of customer service||8%|
|Remote work arrangements||12%|
|Trade clearance and settlement||5%|
|11. Does your firm's business continuity plan address the most significant challenges identified above?||Yes||97%|
|12. Please describe any regulatory relief your firm believes would be beneficial in the event of a pandemic.||Books and records||8%|
|Emergency office locations||9%|
|Military personnel/national guard||2%|
* Financial Services Sector Coordinating Council.