Hurricane Katrina was ten months ago, but its impact is still being felt by the New Orleans region as can be seen from this week's decision to send in the US National Guard to help maintain law and order. Katrina, in August 2005, with winds reaching 175 mph and extensive flooding cost US$ 75 billion in damages and resulted in nearly 2,000 fatalities. In a new report, Lessons Learnt from Hurricane Katrina, released by the Federal Financial Institutions Examination Council (FFIEC) on behalf of five US regulatory agencies, the experiences and the lessons learnt from the disaster by US financial institutions are summarised.
The principle lesson learnt was that many financial institutions had not prepared for a disaster of the intensity and duration and that disaster recovery plans were fragmented and focussed on localised loss of facilities for relatively short periods. Disaster recovery drills, where these had taken place, did not anticipate the extensive loss of multiple services, functions and locations – power, mail, premises, staff access and all levels of communications. As for 9/11, back-up sites were placed under pressure, many failed to deliver and key staff were unable to reach these sites.
Another point of interest was the creation of a local cash-only economy and the problems that banks had in coping with this. Increased amounts of cash were needed in the region with the associated security issues. Over-reliance on mail was also an issue with those using electronic services being far less inconvenienced. Katrina is seen as a catalyst in moving US bank users to internet services.
This report is advice and guidance and does not replace the FFIEC's guidance and procedures booklet produced after the Twin Towers disaster in 2001, but it makes interesting reading for anyone involved in disaster planning for retail financial services anywhere in the world.
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