This story originally ran in the May/June issue of The Texas Indpependent Banker magazine.
By Christopher Williston & Kelly Goulart
Over the last few years, Texas community bankers have learned first-hand the importance of disaster preparedness. In the wake of disasters like Hurricane Rita, the Bastrop wildfires and the fertilizer plant explosion in West, we have all seen the devastating effects that natural and man-made disasters can have on communities and the ability of Texas businesses to serve their customers.
While much has been written on the necessity for disaster preparedness for these types of catastrophic events, many community banks live under a different but serious threat: over-reliance on key personnel.
What would you do if 25-50% of your bank’s employees suddenly contracted the flu? That’s exactly what happened to one IBAT member bank (which will remain unnamed) in late 2013. Tellers, loan officers and senior staff alike were suddenly and without warning absent from the bank for days at a time.
In this kind of nightmare scenario, there is no shortage of issues which might be affected. While the bank might rally to ensure that frontline interactions with customers are covered, there is likely to be an overall disruption in the continuity of some business operations. It might be impossible to ensure that business continues as usual, but there are a few things that community banks can do to prepare for this scenario.
Cross-training of employees in different tasks is always a good idea, even though it will never be exhaustive enough to cover every aspect of the bank’s operations. The Society of Human Resource Managers recommends that employees “swap” or exchange jobs for a defined period of time. In addition to providing natural backups for employees, it also gives them the opportunity to contribute at a different level of bank operations and expands employee skill sets.
While cross-training might result in more training time for each employee, it can prove to serve the bank well in times of distress, or in the event of scheduled employee time off.
Develop a Continuity Plan
Every department knows its strengths and weaknesses. Rather than relying on management to develop a plan for business continuity in each department, have employees take the lead with their individualized understanding of business processes. As part of this planning, ask employees to identify critical versus non-critical tasks in the day to day workflow. In the event of a catastrophic staffing occurrence, it might be necessary to interrupt non-critical products or services.
Additionally, have departments submit a written plan to management detailing what would be required for their departments to continue operations with 25% and 50% of employees out of the bank.
Extraordinary times call for the bank to reexamine its risk profile and determine how it will minimize risk for the duration of the catastrophic staffing event. This might require the bank to cut back on the number of daily reconciliations made by staff, possibly extending some out to every other or every third day, where possible.
In other cases, banks might consider shutting down the lobby and funneling all transactions through the drive through or vice versa, ceasing the opening of new accounts or the acceptance of new loan applications. You still need to provide essential services to your customers, but you might have to get creative about how you are going to provide those services. Any task that is reliant on staff-intensive verification (including wire transfers) should be considered for interruption to protect the bank from undue risk while handling the bare minimum for ACH customers. Even if staff who usually handle those processes are not out of the bank, shutting down those services for a temporary period of time will free them up to handle other tasks.
Back Up Partnerships
If you haven’t already done so, you might consider entering into an agreement with another community bank to serve as a backup processor. While this will depend on being able to find a bank using the same platform program, doing so will add an extra level of protection and allow for certain operations to continue in the most dire of circumstances.
Christopher Williston VI is IBAT’s Senior Vice President – Communications; Kelly Goulart is IBAT’s Regulatory Compliance Manager.