Examination of Witnesses (Questions 740
WEDNESDAY 10 APRIL 2002
740. Can you give us an exampleand
you can choose the size of companywhere they do everything
that you advise them to do, they are well into this, of how much
this would cost?
(Mr Sharp) Yes!
741. I do not have the slightest idea. I
imagine that having alternative premises, their computers being
shunted off by way of reserve, additional staffing, better security.
All this must be a bar to people taking it seriously?
(Mr Sharp) One of the major international banks did
a presentation at a conference last year and they had looked at
how much they needed to invest and it came down to how much could
they afford to lose and for them it was two days' trading. In
the securities industry two days' trading for a major
(Mr Wood) I would not want to put a specific figure
on it at all because I am not fully aware of what the bottom line
impact is from our perspective. I can perhaps go away and look
and come back to see whether we can, but I think that you are
correct in assuming that if you are going to take this seriously
and you are going to have an alternate siteand there are
different standards of that alternate site, are you going to have
it fully prepared and ready so that you have an instant switch
over or are you going to have it "warm" so there is
the "hot" and the "warm" and "solutions"are
you conscious of where that is and how you are going to get your
staff to it? Are you thinking about the back-up processes of the
data? Are you thinking about the physical security of that site?
Then you have got to think about what is the percentage of your
organisation that you are going to put into there and, in addition,
what are you going to do with the rest because you cannot replicate
everything that you do. It is just not practical to do so and
it is not cost effective at all. It all comes down to a cost judgment
on what is the big impact on your critical operations and therefore
what are you prepared to budget out to make sure that you can
sustain your operations for the period of time that you feel you
are going to be out. What 11 September has also shown us is that
historically we probably thought about a 72-hour scenario. I do
not think that is realistic any longer and we need to think much
longer than that.
742. 72 hours where your business is not
(Mr Wood) Where your business is not operating and
when we would start to recover and then we would look for up to
three months of recovery. If you take a serious incident like
we have had in London before which ripped out the centre of your
infrastructure, you need to be thinking much longer than just
three months. The other issue is that there is not a never-ending
supply of these facilities and these operating areas where you
can have these hot centres or warm centres. Inevitably in the
financial sector we are in a very, very short square mile and
something happening there is likely to impact on all of us and
many of us would be looking to use the same sort of facilities.
That is where the issue starts to come as well. You have to be
thinking about those things and about where you are going to locate
your alternative facilities.
(Mr Sharp) There is some experience from Deutschebank
in New York who have effective continuity processes in place.
It a question of what elements you need to get up in what time.
Within two and a half minutes of the first aircraft striking they
were backing up their data. In two and a half hours their first
back-up sites were working. They have 1,400 seats of their own
off site and they then moved people progressively over two or
three days into those sites. So that was a very, very slick operation.
If we think of Cantors who lost 700 people, in 48 hours they were
(Mr Wood) But to the other extreme where some lost
everything and who did not recover and will not recover and others
where they were given a lot of mutual support, which is another
option which can be considered. Certainly we provided for some
of our sister companies' services and facilities in our own main
buildings because we were fortunate enough to have our major operations
in Stamford, Connecticut so well away from the central down town
743. If there is anything that you want
to say which is really sensitive, can I just say that we will
do it properly. If there is something you think is really important
that you do not want to end up in the record then keep it until
the end and we will formally go into private session. Obviously
some of the stuff you are saying is quite sensitive.
(Mr Sharp) The investment really comes down to the
impact. There is one bank here in the UK site that clears a trillion
dollars a day. 72 hours is not soon enough; they have to be operating
744. Is that physically possible?
(Mr Sharp) Yes, they have done it because they have
alternative sites, they have warm desk facilities.
(Mr Wood) We would be able to cut over within two
hours. We have a safe almost replicated site so our data is live
in both areas. We would move our staff there very quicklyif
we still have our staff; and that is the issue.
(Mr Sharp) The implications if these organisation
cannot do that are serious not just for the organisation, they
are serious for the country's infrastructure and probably the
international financial infrastructure.
(Mr Gamble) There is another cost which I heard. At
least one of the major banks at Canary Wharf has decided not to
take the whole of the building and has moved at least half of
its staff elsewhere so they now have an additional cost compared
to what they were planning but they have decided that that is
a more sensible way to operate.
745. Not unnaturally, quite a lot of what
you have had to say is related to financially orientated companies
and I can very easily see why the City of London and New York
would be thinking very carefully about what they should do in
terms of risk management. Are any of you able to tell me whether
the rest of British industry is taking it as seriously as the
(Mr Sharp) If we turn to the retail sector, two of
our leading supermarkets are taking it extremely seriously. One
of them, and it is on public record, Sainsbury's, was able to
handle both the fuel crisis and the foot and mouth crisis because
they had effective continuity in place and were able to build
up toWoods Christmas levels of stocking in three days and maintain
that stock with no fuel supplies or limited fuel supplies. They
had plans and processes in place because they are a critical infrastructure
and the Millennium created a lot of awareness in people's minds.
746. If I took the top 100 companies in
the United Kingdom, would you say to me that all of them are taking
this subject that we are talking about now as seriously as you
have suggested or I think you have suggested?
(Mr Sharp) They are not all taking it to such a depth
as some of them are.
(Mr Gamble) But they are all taking it seriously.
Some of them are spending a great deal of money on it. Chief executives
are now very aware that if they are found wanting in terms of
business continuity it will not just affect their share prices,
it may well affect their position.
747. I will not use the word profit disparagingly
but who does profit from what is happening? Who gains? The companies
who are putting up the alternative buildings? Who else?
(Mr Sharp) It is an interesting point.
748. Risk managers? Disaster recovery managers?
(Mr Gamble) The risk managers certainly do not. The
brokers might but not the risk managers.
(Mr Sharp) There are companies that provide the back-up
type sites. They clearly have seen an increase in demand, although
that industry is interesting because it is concentrating down.
At a time when you think demand would be increasing we are seeing
them merging and concentrating, but that is by the very nature
of how that business is done. The consultants found it very, very
quiet, surprisingly, after 11 September and it has taken six months
for people to realise the depth of what they need to do in an
organisation and they are now turning to the consulting sector
to ask for help. In the end it is going to come down to organisations
trying to bring in a culture where within the organisation people
recognise their vulnerabilities and then looking to see what they
can do to protect themselves and that is where the benefit is
going to be within companies as people get new opportunities.
749. Just so I understand this, in the scale
of awareness, where are we?
(Mr Sharp) If I look at the figures from this research
again of all companies, 45 per cent had business continuity plans.
That was across all sizes of companies. We know that some of them
when we asked them, "Do you have a business continuity plan?"
will take an IT disaster plan as being their business continuity
750. But you would have to look behind those
figures and that research? I do not know anybody else's experience
around here but mine is that organisations are very easily able
to deceive themselves about what they are actually doing when
in fact they are doing something else.
(Mr Wood) It comes back to that point we spoke of
earlier about rehearsal. Having the plan sitting there gathering
dust is one thing but putting it into practice and showing that
it works is another. I suspect that National Air Traffic Services
are doing that today with the failure of the host computer system,
but again they have good resilience built in and they know that
they can change the system over and operate it manually and that
is all part of their contingency planning. Those who know that
it is going to impact the bottom line and that it is going to
cause significant disruption to the community probably take it
more seriously than small to medium-sized enterprises where they
really have not felt an impact yet or have not been directly affected
by some kind of disaster.
(Mr Sharp) What we are seeing is that the customers
of organisations are now beginning to demand evidence of continuity
so the major companies are now asking their suppliers "can
you supply evidence of continuity?" The issue we have got
is that the current method that has been used to audit has been
very much, "Do you have a business continuity plan?"
"Yes", tick. That does not mean to say it is going to
be effective and again it is unrehearsed. We know that only 25
per cent of people are testing their plans every 12 months which
is the minimum recommended. There are some very major organisations
who are reluctant to go for a full invocation test. It is expensive,
troublesome and in real live systems it is not always easy to
do. One that I have experience of has demonstrated they can do
it internationally and do it effectively and that is how they
are able to recover in two hoursbecause they know it will
work. It is not just major business. You may not be aware but
HEFC, the Funding Council for Higher Education, is now requiring
business continuity plans to be in place by universities and the
Charity Commissioners are asking for risk management and continuity
plans as well, so it is spreading beyond plc companies.
751. The question I asked you was about
the scale of where progress had been made and you did not really
answer it. What I think I am getting from you is there is quite
a lot of good work going on, awareness has been raised, and so
on and so forth, but there is a way to go yet.
(Mr Wood) I think we are still at the bottom end of
Mr Cran: Thank you, that is what I wanted to
752. Is there a subdivision of resilience
or something else whose sole rationale is providing advice, consultancy,
buildings, additional computers, etcetera? How many companies
are operating in this field?
(Mr Sharp) I can provide you with evidence of the
sort of things although I have not got that with me, but, again
supported by the DTI, we are issuing a directory of all companies
that are able to provide those type of services because there
is a need for us to be able to lock into it. The number of companies
that are providing disaster recovery and workplace recovery for
the IT side is shrinking and we probably have about five major
companies in the United Kingdom.
(Mr Wood) I suspect there are five main players. Another
issue here is coming back to the point I made about several of
us looking to share the same facility at the same time which is
causing some of us to think about having our own dedicated facility
and therefore perhaps buying into space and, in addition, in fairness
there has been a demise of the dot-com companies that has made
it possible for us to buy cheaply data centres, an opportunity
that perhaps was not there before.
753. Why should the number of companies
be declining when the threat is increasing?
(Mr Sharp) It is the nature of how the business operates
in that you contract space for an annual payment and you share
that space with other people, so it is a question of sharing the
risk. A lot of the finance that was put in place for these organisations
was put in place when the interest rates were very high and therefore
the cost of that space is high and costs are important and therefore
people are holding back on the number of seats that they take
and so on.
(Mr Wood) There is also the issue that we are no longer
reliant on big, mainframe systems and therefore we have got more
diversity available to us. We have got smaller, digital systems
and much more ability to connect in somewhere else and we are
also seeing examples of more homework and different ways of operating.
754. Could people just go home to their
constituencies as parliamentarians do?
(Mr Wood) As long as the main service systems from
an IT perspective are there, although there is a capacity issue
that comes with that.
(Mr Sharp) Can I make one point. It is not just about
IT. For example, you mentioned people, there are organisations
who can help with interim management. When people have suffered
a traumatic effect, trauma counsellors can go in and help people
to help get back productivity. There are mail room recovery facilities
for if you lose your mailing facilities, logistic companies who
supply transport facilities. There is a need to cover the whole
range of business and how do you find alternative facilities at
short notice that can come in and help to repair and recover the
business. It is not just IT, it is a very broad spectrum. When
I provide you with the list you will see exactly what I mean.
755. We are in a profession where there
are possibly millions of people who think they could step in to
do our job. I do not think there is the slightest problem of the
House of Commons needing resilience planning. You would just shout,
"Who wants to be an MP?" And some might add they could
do it a damn sight better than we are doing it. Syd?
756. You have said that there are some companies
that are well prepared and a lot of other companies, 45 per cent
or whatever it is, have said they are getting prepared as well
but, to quote Mandy Rice Davies, "They would say that, wouldn't
they?" I think it is more realistic to think that only the
large companies would ever get involved in this and the others
(Mr Gamble) But the large companies have also got
suppliers so they will be putting pressure on their suppliers,
as happened particularly on Y2K, to make certain that their entire
supply chain is supported.
757. And that is sufficiently powerful enough
to force them to do that?
(Mr Gamble) Yes.
758. It must be very expensive to have preparations
when you are an SME looking at cost and thinking "I would
rather go out of business.
(Mr Sharp) It does not have to be expensive, it is
just a question of thinking the what ifs. If you think about how
quality came in, it came because of pressure from major customers
and it is that type of approach that is now occuring. The survey
showed that customers and potential customers are now asking for
continuity. I think this is where DTI and others have a role to
play to ensure that good practice is promulgated and people then
understand how they can do this and we are prepared as an Institute
to play our role. The whole of our infrastructure is based on
small and medium companies, local government operations more and
more have out-sourced operations or in partnership with volunteer
organisations who are delivering their social service responsibility.
We need to try to encourage continuity in local government because
otherwise they will not be able to meet their mandatory obligations.
759. If I can use the term the monetary
industry, that is a generic term, the industry recognises the
critical points, the nodal points of communication and you mentioned
NATS and we had a session some time ago that frightened us to
death at how unprepared NATS were. Would they recognise all the
critical parts of the business that they are in? Would it be helpful
if central government was to identify where the most crucial points
and operations and sectors are to help them?
(Mr Wood) Very much so. I think that central government
has a key role to play in that particular area and sphere of identifying
what is critical. A good example of that is probably telecommunications
where we can build in whatever resistance and redundancy we want
into our computer systems and our means of communication and we
will probably opt for a couple of diverse routes, one going out
one way and one going out another, from an institution but we
are actually lost when they both come together at the local telephone
exchange and that is where the critical node is and we are not
able to readily get advice on that from central government. There
is as part of what was the old key point protection solution those
sorts of things. I am just careful about what I can say here.
Those issues are there and that is available but I think it needs
to rethink and focus. It was primarily focused on the defence
of the UK and I think we need to perhaps refocus that sort of
infrastructure and support and make that more widely available
to the private sector so that they can understand the impact beyond
their immediate boundaries.