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Our Practice Disaster

A few hours after our staff went home on the night of Thursday, Oct. 18, a massive imaginary storm closed the roads, shut down the trains and knocked out power at my company’s main office in Scarsdale, N.Y.

Our technology manager, Jeffrey Joseph, swung into action. He fired up our backup servers, housed in Atlanta, which maintain a continuously updated set of data files that duplicate the ones on our regular servers in Scarsdale. Using the backups, our staff outside New York – in Atlanta, Fort Lauderdale and Portland, Ore. – could work from their offices as usual on Friday morning. The New York staff, unable to reach Scarsdale and unable to work in the powerless office even if they could, had the option of working from home, if their own power and internet service was uninterrupted, or taking the day off.

Telephones were not a problem because we use an internet-based system that allows any of our offices to answer all of our main numbers. Our investment management operations were unaffected because all our securities records are maintained, and all transactions are executed, off-site by third-party custodians. They have their own backup systems, in addition to the duplicate records we maintain.

Everything went smoothly. Friday was a normal workday at Palisades Hudson Financial Group, except for the fact that the New York employees were working from home. Clients and other outsiders never had any idea that we were dealing with a crisis.

It was all a drill, of course. Imaginary storms don’t knock out power and shut down transit systems. But real storms do, as Hurricane Sandy demonstrated just 10 days later when it slammed into the Northeast with 90-mph winds and a once-in-a-lifetime storm surge.

Eric Meermann, the manager in charge of our Scarsdale office, closed the office on Monday and Tuesday and gave staff the option to work at home or take the day off. Jeffrey stood by to switch to the backup servers in case the main computers went down, which they did as the storm reached its peak on Monday night. (Jeffrey and an Atlanta associate, Stephen Grady III, brought the backup system online before the start of business Tuesday.) Staffers in Georgia and Florida covered the phones for New York, which was not especially challenging since many of our clients were too busy coping with the weather to chat with their financial advisers anyway.

In our post-9/11, post-Katrina world, we are all getting better at preparing for disaster. Our Atlanta and Florida offices, which are housed in high-rise towers, undergo regular evacuation drills. The Securities and Exchange Commission expects registered investment advisers like us to have written disaster recovery plans and to be able to demonstrate that we are prepared to execute them. Even certain landlords demand that their tenants show proof that they have insurance to replace computers and business records in the event of a fire or other casualty.

No disaster plan can keep the lights on or the waters at bay when nature asserts herself. Hurricane Katrina demonstrated this in 2005, not only by inundating New Orleans when the levees failed, but by wiping out entire waterfront neighborhoods from Mississippi eastward to western Florida. All we can do is try to minimize casualties and property damage by taking prudent measures before catastrophe strikes, and to prepare for a speedy recovery.

Are we overcompensating?

New York City’s subway system opened in 1903. Many storms have come and gone since then without ever shutting down the entire system before 2011. Now, the trains have stopped running twice in the space of 14 months – first for Hurricane (later Tropical Storm) Irene in August 2011, and then on Sunday evening in advance of Hurricane Sandy. When the trains quit running on Sunday, Sandy was still 500 miles out to sea, the streets of the city were dry and the winds were no higher than what New Yorkers typically see from a run-of-the-mill coastal rainstorm.

There were a lot of good reasons to shut down at least part of the transit system. The closure allowed operators to move equipment to safer locations and to shut off electricity along tracks that were liable to be immersed in salt water by the harbor’s surging tides. It also protected transit workers, who would have been exposed to the weather while operating the trains and also while traveling to and from their shifts. Yet I thought there was a certain level of heavy-handedness in Gov. Andrew Cuomo’s decision to shut down all service, not just in flood-prone subway tubes but on buses and elevated trains. The city even ordered taxis off the streets on Monday night.

“We want people staying in their homes,” Cuomo said, according to The Wall Street Journal.

But in a city of 8 million people, not everyone can stay home, even during a bad storm. Hospital workers, ranging from doctors to janitors, must report to work to keep patients safe and sanitary. Home health aides have to reach elderly and disabled individuals who rely on them. Police, firefighters, paramedics, prison guards and 911 dispatchers all need to be at their posts. Journalists must get to newsrooms and studios to get the news out. Pharmacists and grocers have to keep the city’s population nourished and medicated. Homeless families need to be housed, and hungry people need to be fed in soup kitchens and by Meals On Wheels.

Other public officials followed Cuomo’s lead. The village of Scarsdale declared an emergency and banned all but emergency vehicles from the roads, effective at noon Monday. There was no advance notice; in fact, we did not even know about the declaration until we received an automated phone call at our office, hours after the ban took effect. We were unaffected because we had already closed our office, but I wondered what it meant for the families of many elderly residents who live in apartments near our office building.

Back in 1985, I rode a Metro-North train to Manhattan on the morning that Hurricane Gloria swirled toward the city. (It veered eastward and struck Long Island instead, after doing considerable damage on the mid-Atlantic coast.) I walked from Grand Central Terminal to the Associated Press offices in Rockefeller Center, where I helped cover the storm, but I would have had the option of taking the subway if conditions on the street had been worse.

This week, I wondered whether my daughter would have to walk 30 blocks from her Upper East Side apartment to the newsroom where she works, because the Lexington Avenue subway was shut down. She ended up working from home – evidence of how technology has changed journalism between my era and hers, but also a sign, perhaps, of how our attitudes toward coping with the elements have changed.

I don’t blame elected officials for acting aggressively to protect their citizens. I am sure they would prefer to err on the side of caution, rather than risk what happened in New Orleans happening again. And nobody wants to ask a rescue worker to risk his or her life to save someone who could have moved to safety hours or days earlier.

The worst of the storm will be over by the time you read this. The ocean will be back where it belongs, though power outages, downed trees and transit disruptions are likely to continue for days. Property damage will be in the billions of dollars, perhaps tens of billions. But with any luck, there will have been minimal injury and loss of life.

Maybe we are overreacting, but overall we are getting better at dealing with disasters. Practice pays off.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book Looking Ahead: Life, Family, Wealth and Business After 55.

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