Overloaded phone lines even made it impossible
to reach anyone in the bank's midtown offices, and the numbers that treasury
managers found on the bank's Web site didn't lead to the people GMAC needed
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to talk to. GMAC's staff even tried calling Europe, but it was already too
late in the day. Says Monica Estes, director of treasury services at GMAC
Mortgage, We really couldn't get
hold of anyone.
So GMAC stopped sending through files, only to
find out later that the bank which Estes declines to identify had successfully
switched to its back-up system and was able to continue processing. The problem
was that the mortgage company's officials had no way of determining that. GMAC
was far from alone in its confusion. Corporations all over the world felt the
impact of the deadly attacks just because one or more of their vendors and
suppliers were located near Ground Zero, or had a vital facility in Manhattan,
or lost key personnel. Companies nationwide were affected when the Canadian and
Mexican borders were closed in the security crackdown that followed and when
airports all across the U.S. suddenly shut down.
To review the state of preparedness of your own
company in the wake of such a tragedy is the obvious first response. But as some
executives learned during the drills for the ultimately utterly uneventful
arrival of Y2K, the next question to ensure against business interruption must
be: How prepared are the vendors and suppliers that provide a company's most
valuable goods and services?
Perhaps surprisingly, despite the near-hysteria
that surrounded Y2K, many corporations are still not in a position to evaluate
the risks they face from potential disruption of their business-to-business
networks. Here is a checklist of things to know about your vendor to make sure
your company doesn't get into trouble because of another company's oversight
or lack of oversight.
1. Know which services and suppliers are most
important to your business. Then you must determine how long your company can
operate if any of these are cut off and whether they are vital enough to merit
enlisting an alternate provider. Companies
need to assign a weighting system to functions, so they understand where
they're willing to pay a premium, says Linda McLaughlin-Moore, senior vice
president for treasury services and global clearing at J.P. Morgan Chase.
2. Ask your vendor or supplier what kind of
back-up systems are in place for facilities, telecommunications and personnel.
In this case, details count. So you must determine how old the plan is and when
it was last tested. Many vendors
can show you their disaster recovery plan, says Brian Turley, president of
Strohl Systems, a business continuity software and consulting company in King of
Prussia, Pa. It's a hard copy. It
has an inch of dust on it. Obviously, that's not an executable plan. Ask not
only what will be done, but how long it is expected to take. McLaughlin-Moore
also suggests asking vendors about their past experiences recovering from
disasters. Many times it will not
only depict how well they do, but bring up other questions that the corporate
might not have thought of otherwise, she says.
3. Find out whether executives at the supplier
or vendor are familiar with emergency plans. Strohl's Turley suggests talking
to members of the vendor's management team to be sure that they understand the plan and (that) it's an actual plan, not just
something that is put in front of the customer. On Sept. 11 many companies found
out how inadequately they had briefed various managers, he says. A
lot of management team members actually worked contrary to what the plans had
put in place.
4. Ask for a demonstration. Once the questions
are posed, companies shouldn't be satisfied with mere words, consultants say. Absolutely,
visit, says Donna Scott, research director at the Gartner Group. Vendors should
be able to show you their business continuity plan. They should be able to tell
you the last time or the last couple of times it was tested. They should be able
to take you to the disaster recovery site, and show you the equipment and the
workspaces.
5. Get an expert to evaluate the plans. Michael
Redmond, senior manager in KMPG LLP's risk and advisory services practice,
recommends that companies ask vendors to have their plans reviewed by a third
party certified in business recovery to be sure they meet standards set by
groups like the Disaster Recovery Institute, the Business Recovery Institute and
the Federal Financial Institutions Examinations Council.
6. Pay special attention to personnel
preparedness. The one thing that
most companies probably had not prepared as much for is the loss of people, says
J.P. Morgan's McLaughlin-Moore. Some companies in the World Trade Center saw
huge numbers of their employees die. Consultants note that all the back-up
facilities and business continuity plans in the world are useless if there are
no employees left to run the business. Corporates should be asking vendors
whether employees are cross-trained or whether services are provided at more
than one of the vendor's facilities.
7. Is your vendor prepared for the magnitude of
physical destruction that took place on Sept. 11? Normally, when you create a plan, you assume at some point a
day, three days, a week you can go back to your primary sites, Gartner's Scott
says. For many companies, that wasn't the case because of the destruction in
lower Manhattan. Thus, having
relationships with real estate brokers becomes critical, she says, noting that
while it took some companies days and even weeks to get back to business, others
found alternate locations within hours or at least by the next day. It is also
important for a vendor's back-up facilities not to be located too close to its
primary operations. An alternate facility should be between 25 to 50 miles away
and on different electrical and phone grids to ensure they're available during
a disaster. Back-up facilities also should be accessible by different roads and
modes of transportation. Turley, meanwhile, argues that the events of Sept. 11
suggest that a relocation facility ought to be in a different city entirely,
since the destruction and clean-up operations made it impossible for many New
York area employees to get to work anywhere in the metropolitan area. Yet, a
back-up too far away necessitates an entire workforce be trained to run it.
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