Do You Have a Contingency Plan in Treasury?

In the fast-paced world of Treasury management, the unexpected can happen at any time. Whether it’s losing access to your banking portal, an office-wide internet outage, or a fire breaking out in your workplace, having a robust contingency plan is essential. Treasury operations are critical to an organization’s liquidity and financial stability, making it crucial to prepare for disruptions that could impede your ability to operate smoothly.

A recent example highlights the importance of being prepared: on September 2, 2024, the Lloyds Banking app went down, leaving thousands of customers unable to view transactions or manage their accounts. This incident underscores how vulnerable Treasury operations can be when technology fails, emphasizing the need for a comprehensive contingency plan.

This article will guide you through key considerations and actions you can take to develop a contingency plan for your treasury operations, using real-life scenarios like the Lloyds Banking app outage as a foundation.

1. Assess Potential Risks

The first step in developing a contingency plan is to identify potential risks that could disrupt your treasury operations. These risks can be categorized into different areas:

Technology Risks: System failures, banking portal outages (such as the recent Lloyds example), cybersecurity threats, and internet outages.
Operational Risks: Power failures, communication breakdowns, staffing shortages.
External Risks: Natural disasters, fires, political instability, and supplier failures.
Compliance Risks: Regulatory changes, financial sanctions, or unexpected audits.

Understanding these risks helps in prioritizing and preparing for them.

2. Develop Backup Access for Bank Portals

Bank portals are the backbone of daily treasury operations, used for executing payments, monitoring cash positions, and reconciling accounts. The Lloyds Banking app outage demonstrates how vulnerable organizations can be to disruptions in access. Here’s how you can mitigate these risks:

Alternative Access Points: Ensure you have multiple access points to your banking portals. This could include VPNs, alternative devices, or mobile access through other banks in your network.
Multi-User Access: Ensure multiple users have access credentials. This avoids scenarios where one person’s absence causes a total access issue.
Contact Lists: Maintain up-to-date contact lists of your bank relationship managers who can assist in emergencies. Direct lines can help in quickly resolving access issues when automated systems are down.

3. Prepare for Office Internet Outages

An office internet outage can bring your treasury operations to a halt. To avoid this, consider the following strategies:

Backup Internet Connections: Set up a secondary internet provider as a failover. Ensure that this connection is independent of your primary provider to reduce the risk of both going down simultaneously.
Mobile Hotspots: Equip key treasury staff with mobile hotspots that can be used as temporary internet solutions.
Remote Work Readiness: Ensure that critical treasury functions can be performed remotely. This involves setting up secure access to key systems from home or alternate locations.

4. Develop Response Plans for Physical Disruptions (Fire, Natural Disasters)

Physical disruptions like fires, floods, or other natural disasters pose significant risks. Here’s how to prepare:

Evacuation and Safety Protocols: Develop and regularly test evacuation plans. Ensure all staff are familiar with emergency exits, fire extinguishers, and meeting points.
Data Backup and Recovery: Regularly back up data to cloud storage and ensure it is accessible from remote locations. Test recovery plans to ensure data integrity.
Alternate Worksites: Identify alternative locations where treasury functions can be temporarily set up, such as co-working spaces or branch offices.

5. Cybersecurity Measures

Cyber threats are one of the most significant risks to treasury operations, with potential financial and reputational damage. A strong cybersecurity contingency plan should include:

Regular Software Updates: Keep all treasury software and systems updated with the latest security patches.
Access Controls: Implement strict access controls, including multi-factor authentication for sensitive applications and systems.
Incident Response Plan: Develop a response plan for cyber incidents, including steps for isolating affected systems, communicating with stakeholders, and recovering compromised data.

6. Staff Training and Cross-Training

Staff are the backbone of your contingency plan. Ensure your team is well-prepared to handle disruptions by:

Regular Training: Conduct training sessions on emergency protocols, software use, and crisis management.
Cross-Training: Train staff in multiple roles within treasury to ensure operational continuity if key personnel are unavailable.

7. Testing and Reviewing the Contingency Plan

A contingency plan is only as good as its execution. Regular testing and review are crucial:

Simulations and Drills: Conduct regular simulations of different disruption scenarios. For example, simulate a bank portal outage to see how quickly you can switch to an alternative method.
Review and Update: Review the contingency plan at least annually or whenever there are major changes in your operations or risks. Update it to incorporate lessons learned from tests and actual incidents.

8. Establish Communication Protocols

Effective communication is critical during any disruption. Establish clear communication protocols to ensure that all stakeholders are informed and can respond appropriately:

Internal Communication: Set up internal communication channels, such as group chats or emergency email chains, to keep everyone updated.
External Communication: Identify key contacts at banks, suppliers, and partners, and establish protocols for reaching out during a disruption.

Conclusion

The recent Lloyds Banking app outage serves as a stark reminder of the vulnerabilities in our treasury systems. Contingency planning in treasury is not just about having a backup system; it’s about having a comprehensive approach that covers every aspect of your operations. From technical failures to physical disruptions, a well-thought-out plan can mean the difference between a minor hiccup and a major operational failure. Regularly reviewing and updating your contingency plan ensures that you remain prepared for whatever challenges come your way, safeguarding your organization’s financial stability.

Take the time to invest in your contingency planning today, because when the unexpected happens, being prepared is your best defense.

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