An exercise to simulate the effects of a flu pandemic by financial firms in the City of London, has raised questions over the ability of businesses to support large-scale home working as employees stay away from the office to avoid infection.
The exercise highlighted that financial firms could face significant challenges if a greater proportion of staff work from home, a report issued by the Financial Services Authority, the Treasury and the Bank of England today reveals.
70 financial organisations and 3,500 individuals took part in the exercise, the largest of its kind, which simulated the effects of 22 weeks of pandemic on the banks and insurance companies in the capital.
The exercise raised significant challenges for firms including the need to ensure effective compliance and control when staff worked from home, and the difficulties of maintaining IT security and health and safety concerns.
The exercise also raised questions over the ability of telecoms networks to support wide-scale working from home over a long period, when staff shortages in the telecoms sector gradually eroded their maintenance capability.
Absenteeism due to illness rose from 15% at the start of the exercise to 49% at the height of the pandemic, with clusters of up to 60% absenteeism in some business units.
Firms were forced to consider measures including repatriating staff from overseas offices, introducing quarantine rules, and offering bereavement counselling and help for staff who faced financial difficulties.
Wholesale financial firms responded to the growing shortages of staff by reducing trading volumes, and cutting back on other work to concentrate on customer focused business.
The distribution of cash across the country emerged as an early challenge during the exercise. High street banks were forced to close an increasing number of branches and ATM machines became unavailable.
Although some banks were able to extend the expiry dates on credit and debit cards to work around postal delays, others were unable to do so.
The scenario had less impact on insurance firms. However they are expected to face a surge of claims, during a pandemic. Firms considered a number of mechanisms for speeding up payment, including making direct payments to customers credit and debit cards.
The FSA, Treasury and the Bank of England are planning a series of seminars and workshops early in the year to address questions raised by the exercise. Discussions are also planned with overseas financial regulators.
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