Backup systems kept HSBC’s problems from being worse

HSBC Bank USA has struggled mightily to recover from the crash of a key computer system two weeks ago, but it could have been a lot worse if the banking giant hadn’t had a backup plan and system in place.

That’s why experts say it’s critically important for businesses of all sizes to develop contingency plans and back up their computer systems in case of a disaster or crisis of any kind. And the same applies for individuals with home computers.

Such preparation, including designation of a single coordinator, will ensure that a business can get back on its feet quickly and restore operations and service to customers with minimal or no interruption. It could even mean the difference between survival and failure.

“When you’re in a crisis situation or disaster situation, you need a crisis management plan in place,” said Paul Sullivan, vice president and general manager of Agility Recovery Solutions, a disaster recovery firm in Mississauga, Ont., that has clients in Western New York.

“If you’re not handling the crisis effectively, you will eventually get back up, but you will either have spent too much money, made errors in how you spent the money, and you will have taken a lot longer than what normally would have occurred.”

Similarly, he said, backing up a home computer can make the difference between an easy recovery of personal information, e-mail addresses and files, or enormous frustration and loss.

“You can almost equate it to losing your wallet,” Sullivan said. “Losing your desktop is the same kind of thing. If . . . it’s destroyed, lost or stolen, think about the effect it has on your life.”

Wholesale insurance brokerage H. R. Keller and Co. hadn’t updated its outdated contingency plan in more than 20 years, and it was focused on computer backups. So owner and president Eric P. Keller knew he had to upgrade his preparations.

The 44-year-old Tonawanda company and its 32 employees provide about 1,200 retail insurance agencies in New York and Pennsylvania with hard-to-place property and casualty insurance coverage, mostly for their business clients.

“If there is some major disaster, somebody in the insurance business needs to be there to respond,” Keller said. “We’ve got customers records here. We’ve got to be here.”

And while a lot of businesses have “business interruption” insurance coverage, Keller said that doesn’t replace planning. “Without any plan, your business interruption plan would take care of the costs, but it doesn’t figure out for you how to do it,” he said.

The issue of contingency plans gained attention here after HSBC’s core banking computer system wentdown Aug. 15 because of a faulty disk in its data storage system. The bank spent the next 10 days repairing the problem, restoring data, and catching up on transactions so that customer accounts could be properly updated. Customers are still reporting sporadic problems, but most issues have since been resolved.

The bank’s problems were minimized compared to what could have happened. The computer crash affected only the posting of transactions that had just occurred or that were being processed at that time and over the coming days.

That’s because the bank had backup electronic records of all the accounts and prior transactions, enabling it to quickly restart using the most recent backup and begin the catch-up work from there. And the bank has a “robust contingency plan and invoked it when this issue arose,” enabling it to tackle the problem right away, said spokeswoman Linda Recupero.

“Contingency plans for all areas of our bank are vital not only to doing business, but to safe and expeditious recovery when an issue like this occurs,” she said.

In HSBC’s case, banks are required by their regulators to have such emergency plans and systems in place, so there was no choice about doing so for the British banking giant. And many other large businesses are sophisticated enough to make similar preparations.