Ah, summer! For all of us, now is the time to take a step back and enjoy a well-deserved break. For advisors, however, the slightly-less frantic summer months provide a great opportunity to review your technology solutions and processes, and confirm that they are operating they way you intended.
Even though this volatile market environment may demand more of your time and attention right now, every firm should have an annual process for testing two essential business functions: your backup strategy and your business resumption plan. I know that these are not the most exciting technology areas on which to focus your time and energy, but think of it as risk management for your business: if these two areas are not properly maintained, what might be a small problem could have a devastating impact on your business. All too often, I hear from advisors dealing with difficult situations that involve failed backup processes, and each time these events occur, the advisors describe simple things that they wish that they had done previously in order to be better prepared for the event itself. But that does not have to be you. With a little attention and focus, and a simple plan, you can be confident that your firm is prepared for the unlikely but potentially damaging business disruption.
Get to Know Your Backup Procedures
Take a close look at your data backup strategy. All advisors know the importance of backing up their systems and critical data, but it’s also a legal requirement. In the Investment Advisers Act, rule 204-2 covers the requirement for RIAs to make and keep true, current, and accurate records of their businesses. Many advisors have developed a backup process that is executed on a daily basis. E-mail, client documents, and other business-related data should be stored on a tape drive, a portable hard drive, or at an offsite location using a Web-based service. In order to be fully compliant, many advisors will have two processes: one to create an immediately accessible backup; and another to create a permanent and indelible record. For now, I will focus only on the immediately accessible backup needed to protect against a business disruption.
What Your Peers Are Reading
Most likely there is some type of cyclical schedule or rotation in this process, meaning that a full backup is completed and then incremental changes are captured for a certain time period. For example, a firm may do a complete backup of all its critical data each Friday night, but then only capture the incremental changes with their daily backup conducted Monday through Thursday. Perhaps the firm also stores the complete backup executed on Friday for an extended period. This is a very common practice, because it captures all the critical data and it is easy to maintain. The main question for advisors to ask from time to time is this: How is your firm meeting its need for a backup process, and what type of rotation are you following?
Sounds simple, but overlooking this area can really create problems if your backed-up data is ever needed and the schedule was not being followed correctly. I encountered a case, for example, where the rotation schedule in an advisory firm’s backup process called for replacing the backup tape each day, but the firm was replacing the tape only once per week. The firm was overwriting the complete weekly backup set with the few daily changes that were made, so that at the end of the week, the firm had backed up only the few additional documents and changes that had been made.
Applications and PC Backup
An important consideration with your backup plan is the programs and services your business actually uses and the potential implications they have on how you store your data. So start by reviewing the backup requirements for the software programs that you use, confirming with each software provider the data they require to be backed up to ensure the program will operate. The simple solution might be to back up everything that has to do with the software program. However, the program might have processes already built in that streamline the backup task and ultimately allow you to restore the data much easier. Unfortunately, there are too many stories out there where a firm thought it was backing up everything it needed to restore the software program, but then finds out that it missed a required file when it is time to use the backup copy.