The Center for Disease Control responded to the Ebola outbreak in Africa by raising the activation level of its Emergency Operations Center to Level 1, the highest state of alert in the U.S. Although Ebola has been confined to a few nations in Africa, the situation should serve as a reminder to financial advisors of the need for business continuity planning in anticipation of pandemics.
A pandemic is an epidemic occurring over a wide geographic area, potentially impacting millions of people. In June of 2009, the World Health Organization labeled the H1N1 influenza outbreak ("swine flu") a pandemic by raising it to the highest alert level, Phase 6. Ebola has not yet been raised beyond WHO Phase 3 in any country, due to its geographic confinement.
All broker-dealers are required by FINRA Rule 4370 to have business continuity plans, or BCPs, and the SEC strongly recommends these plans for RIAs.
Recommended For You
To date, most BCPs have anticipated an emergency similar to Hurricane Katrina or Hurricane Sandy. However, pandemics require a different kind of planning. The biggest problem a pandemic could cause is prolonged rates of high employee absenteeism, due to travel restrictions.
In 2006, federal regulators warned that "worst-case" pandemic planning should prepare for "a protracted absentee rate of 30-50% of a firm's personnel for four to six weeks, in waves over a 12-18 month period."
The good news for the financial industry is that the 2009 H1N1 pandemic caused most firms to review their BCPs for pandemic preparation planning.
To maintain operations during prolonged period of absenteeism, the keys are: 1) cross-train employees to do multiple jobs; 2) arrange on-site or nearby dormitory/hotel accommodations for some key employees; 3) create reliable telecommuting arrangements for other employees; 4) partner with another similar firm in a separate geographic region and agree to serve as each other's mutual back-up work sites.
You also may want to review FINRA's guidance on pandemic preparedness, including results of its survey of members on how they plan to cope.
Of note: 27% of securities firms said that some portions of their BCP pandemic plans would be triggered by a WHO declaration of a Phase 4 pandemic.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
