When Disaster Strikes, Treasury Can Strike Back

Here's how to ensure cash management activities aren't crippled by unfortunate events.

The events that historically have been the focus of disaster recovery planning -- fire, floods and hurricanes, for example -- certainly have exacted tremendous financial and human costs. However, they are statistically predictable and fairly well understood. In contrast, some types of disasters that have more recently emerged, such as cyber-crime, terrorist attacks and rolling blackouts, are more difficult to predict, and many organizations are still learning how to protect themselves against them. That makes planning for these risks extraordinarily challenging.

Several shifts in the business environment have raised the profile of disaster planning -- also known as business continuity planning -- in the past few years, particularly within treasury. For starters, cash management operations have become increasingly dependent on their IT systems. Most treasuries now are linked by computer networks to other departments within the enterprise and to their banking partners. A problem in any part of a system can spread rapidly.

And Sarbanes-Oxley has prompted many organizations to take a hard look at their business continuity arrangements. Companies' disaster recovery plans should include provisions for sustaining the rigorous financial controls that the legislation mandates, says Michael Croy, director of business continuity services with IT consulting and leasing firm Forsythe Technology in Skokie, Ill. A company needs to know that if a disaster disrupts its operations, the integrity of its control processes as well as its data will remain intact.

Yet only about 50 percent of treasurers are aware that their organization needs a disaster recovery plan, estimates Dan Carmody, president of TreaSolution Inc., a consulting and staffing firm based in Chicago. And even treasuries that have business continuity plans in place often fail to regularly update and test them, he reports.