When the dozen members of Wyndham Worldwide’s treasury department met by phone on Tuesday morning, Oct. 30, in the wake of Superstorm Sandy, they spent a few minutes taking it all in.
Most of the team had no power, living as they do near company headquarters in Parsippany, N.J. Some landline coverage was iffy, and cell service was spotty at best, causing interruptions from time to time in the team’s call. The flooding of lower Manhattan was something no one had imagined, and it called into question how the company’s banks would fare.
“Who would have guessed that so many things could go wrong at the same time?” says Tom Edwards, treasurer at the $4.3 billion hotel, timeshare and vacation rental company, pictured at right.
The treasury team’s preparations included rolling over some commercial paper in its $500 million program to limit maturities during the week of the storm. Thanks to its careful planning, everything went smoothly for Wyndham’s treasury team, even as headquarters became a second home for employees who were dealing with extensive power outages and needed a place to come to keep warm. Wyndham even issued $275 million in debt a few days after the storm hit.
Most large companies have found the same. Even though Sandy caused damage they had not imagined, they were able to proceed with treasury operations mostly as if little had happened, thanks to technology, remote working capabilities, and the resources and preparation of banks.
“We were able to have contact and interaction with our banks every day,” Edward says. “They were extremely supportive, and very helpful.”
Verizon Communications agrees, says Mike Stefanski, treasurer and senior vice president at the $111 billion telecom, which based in based in lower Manhattan.
“We have contingency cash on hand and work with our banking partners to prepare for these types of situations,” Stefanski wrote in an e-mail. “We are very pleased with the execution of our internal team and external banks while managing the many challenging personal circumstances of the storm.”
Over the last decade or so, banks and corporate treasuries have been stress-tested by the Y2K alarm, Sept. 11 and the 2008-2009 financial crisis, says Anthony Carfang, a partner at consulting firm Treasury Strategies. “Had this happened 20 years ago, you probably would have had a financial calamity,” Carfang says, but “for most big companies, it was just a matter of leveraging the banking relationships they have.”
Still, there’s always room for improvement in preparation, says Wyndham’s Edwards. He and his team are taking time now to imagine other eventualities and prepare for scenarios that give them less time to plan. For example, they’re updating and expanding their contact lists to include banking contacts in other locations.
“We had plenty of time to plan for this,” Edwards said. “If it were more sudden, our current plan would be adequate, but we’re preparing for different scenarios.”
Daniel Carmody, managing director of TreaSolution, a Chicago consultancy, says treasurers should plan ahead and test everything thoroughly at least twice a year.
He recommends treasuries use the following to-do list to have a well worked-out disaster recovery program in place at all times.
- Write up a disaster-planning matrix, with the y axis plotting the severity of the disaster and the x axis the extent to which communications are disrupted. “It’s easier to plan for the symptoms than the specific incident,” Carmody says.
- Provide key personnel with the necessary equipment, from cell phones and Internet cards for laptops to scanners or faxes.
- Update phone, cell phone, e-mail and snail mail trees regularly.
- Identify another location where everyone can regroup and work together.
- Where possible, push some treasury functions to the Internet, so they can be accessed remotely.
- Document everything, from everyday processes to the extraordinary. Include the names of individuals responsible.
“If a treasury department doesn’t plan for lack of liquidity,” Carmody says, “it’s like an ice-making factory not planning for lack of water.”