Firms strive to recover records after attack

By : |September 28, 2001 0



NEW YORK: In the panic that took hold after hijacked jets slammed into the
World Trade Center, Carol Larson remembered to grab her laptop before running
out of her office in the adjoining World Financial Center. It was a split-second
decision that ended up saving megabytes of critical data for the accountant’s
customers after the badly damaged financial center was evacuated. But other
firms housed in and around the leveled World Trade Center were not as lucky as
Larson, a partner at accounting firm Deloitte & Touche.

The attacks that tore through New York’s financial district burned crucial
personnel records, leases, contracts and other paper documents, say analysts and
disaster recovery experts. Recent electronic data that had not yet been copied
also went up in smoke, they said. The disappearance of records could disrupt
business across the country for months to come, analysts say.

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"It’s going to be a herculean task to put a lot of this stuff
together," said Jack Barthell, a partner with auditing and consulting firm
PricewaterhouseCoopers. "The problem I think is compound here and that’s
the loss of the people who knew what the records were, let alone where they
were."

Disaster recovery company Legato found that for the 18 companies it helped
get back on their feet, only about 70 percent of their data was backed up and
stored elsewhere, Legato Vice President Doug O’Shaughnessy said. Those that lost
records are trying to identify and replace them. "At the very least, people
are saying there are going to be huge delays," said Paul Bernard, who leads
an outplacement firm that bears his name. "Also it becomes a domino effect
… it’s like General Motors not getting a part from another area." One
international bank, for example, worried about providing clients with cash and
delays in getting approval letters, said Bernard.

In the worst-case scenario, a company may not know which customers owe money
to the firm and which vendors it owes money to, said Richard Oppenheim,
president of Denver-based SysTrust Services Corp., which provides information
technology assurance services. Some of the vendors might start charging interest
on the amount that is due, adding to woes of companies trying to dig their way
out of trouble, he said. "The world doesn’t stop," Oppenheim said.
"But because you had such a slowdown, it’ll take several months to
recover."

Companies are spending huge amounts of time hunting down copies of lost paper
records at government agencies, law firms and auditing firms, said Russ Gates, a
partner at accounting firm Andersen’s risk consulting unit, which provides
disaster recovery services, among other things. Most important business records
are filed in more than one location. Even so, some records such as treasured
original articles of incorporation, that are akin to a birth certificate for a
firm, might never be recovered, said Barthell.

The World Trade Center attack has inspired many firms far from the area of
the attacks to take a fresh look at their records handling, O’Shaughnessy said.
Many firms are looking to beef up their disaster recovery plans, including
backing up data and applications and keeping junior employees abreast of major
issues.

To be sure, most firms hurt by the attacks had much of their data backed up
and could retrieve key financial and customer-related records, analysts and
disaster recovery experts said. Copying important documents is typical in the
heavily regulated financial services industry.

CFO rolls up sleeves

But while most firms back up their data, it’s normally done only every few
hours, or sometimes even days, experts said. Legato customers lost data that had
not been backed up for the last eight to 48 hours before the attacks,
O’Shaughnessy said. Moreover, the most recent data can be the most crucial. For
example, when the two hijacked airplanes rammed into the World Trade Center two
weeks ago, one of Legato’s biggest customers – a financial services firm located
in a building across the street – had just four hours to remove about 20,000
tapes of data on securities trades, he said.

Everyone, including the firm’s chief financial officer, rolled up their
sleeves and pulled out the tapes instead of fleeing the area. "It was
information they couldn’t have done without when the markets opened,"
O’Shaughnessy said. The stock market was closed for four days after the attacks,
partly to allow firms to recoup records and data.

Many of Legato’s medium-to large-sized firms lost human resources records and
internal company records such as bills and departmental records that were not
backed up, he said. But the biggest risk yet for firms is paper records such as
purchase agreements, property leases, deeds and legal records that went up in
smoke, experts said.

"Original documents are always critical and therefore it’s the most
sought after," especially in a dispute, Barthell said. Tragically,
companies also lost employees – which sometimes meant they were unable even to
know what records existed and the contents of those records.

One of Legato’s customers, for example, recreated its information technology
environment but its workers weren’t clear what to do with it once it was up and
running, said O’Shaughnessy. "It’s left workers spinning in circles,"
he said. "Not only is it emotional draining, but it’s definitely slowing
down the recovery."

(C) Reuters Limited 2001.

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