Singapore’s financial sector industry-wide exercise (IWE) will run from Thursday, Aug 28 to Friday, Sep 11, 2008. There will be three sessions, presumably corresponding to escalating stages of epidemic development, in a highly-pathogenic influenza (HPI) scenario over the two-week period, plus a “practical drill” on Friday 29 August that will require participants to execute HPI response plans at their own facilities.

These are the briefing slides used at ABS’ Apr. 3 announcement in Singapore, and these slides are for the first “communique” briefing on May 7. This slide lists the dates of future briefings and communique’s. The ABS has opened an IWE portal (exercise web site) specifically for the exercise.

• These are the MAS guidelines on pandemic measures for banks, issued in January 2006.

• These are MOH’s recommended infection control measures for workplaces, last updated in May 2007.

• These are the Singapore MOH influenza alert levels (there are five; WHO has six).

The IWE is sponsored by the Association of Banks in Singapore (ABS) with support from the Monetary Authority of Singapore (MAS) and Singapore’s Ministry of Home Affairs (MHA), which includes the Singapore Police and Civil Defence Force (our fire department). Singapore’s Ministry of Health (MoH) will surely contribute, too.

The ABS has contracted with the Singapore office of KPMG to run the exercise. That allows ABS to take advantage of KPMG’s size and the experience of its London office running Singapore’s last IWE in May 2006, while eliminating past complaints about long-distance travel expenses, technology glitches and an implausible scenario.

Financial institutions (FI’s) are contributing volunteer personnel to a scenario development team and to a working group that will manage, execute and evaluate the exercise. Each FI will also have an internal “red cell” team whose jobs will be to personalize the pain. So, you won’t learn, for example, that four people have reported sick; you might learn that ‘Chan, Tan, Lim and Kwek in our settlement department (all of whom actually do work in your settlement department) have all called in sick and we may not make our 16:00 payment deadline’. Diabolical.

Singapore’s importance
Banking produces 11% of GDP and employs 80,000 people in Singapore. Here’s the MAS list of institutions by license category and by name, a Who’s Who of global banking. The bulge bracket brigade - Citi, UBS, Credit Suisse, HSBC, Merrill Lynch – are all here, but as you can see from the list, they have plenty of company. American financial journal Barron’s reported in January that Singapore is the world’s second largest private banking center, behind Switzerland, and growing at 30% per year from new wealth in Asia.

There are almost 150 insurance companies registered in Singapore, and the regulator is eager to get them to participate in the exercise, as well. The Singapore Exchange (SGX) is also encouraging derivatives members and securities members to participate for the first time. The ABS exercise is fortuitously timed: SGX will post a rule for public comment in May to require members to prepare and test business continuity plans, so a big, public exercise provides some impetus to get started on those plans.

Scenario possibilities
In the scenario, the Singapore MoH alert level will rise from green (currently) to yellow then orange then red, as an infection vector reaches Singapore. (Here’s a sample scenario for how that could happen.) The scenario will force management to decide when to ’split’ their employees, sending some to a recovery site, others to work from their kitchen tables. Maybe 30% or more of employees won’t show up for work because they are sick, scared or caring for someone who is. Customers will make fewer visits to branches, more ATM withdrawals, and be more interested in online banking. Telecom and power infrastructure might be impaired temporarily (but not long enough to embarrass Singapore Telecom and Singapore Power). The securities market should decline, but the derivatives market will allow some pessimists to make healthy returns.

As I wrote in January, the scenario should try to make bank executives feel viscerally the effects of an epidemic. How would one do that? Force executives to deal with multiple employees dying. But death is a very sensitive subject in Asia, so I won’t be surprised if the scenario allows participants to tread lightly around it.

Some other guesses about scenario developments:

• bank are forced to close some branches due to employee absences, increasing demand for online banking. In addition to the obvious need for more internet bandwidth, however, internet banking in Singapore also requires an individually-assigned, serial-numbered security token for each user. The logistics of acquiring and distributing them during a pandemic may be challenging.

• participants discover not only that thirty (30%) percent or more of their employees don’t show up for work, but that those absences occur among employees performing critical functions (clearing, settlement, payments, money market trading).

• schools close with little or no warning for up to six (6) weeks, so one parent has to stay home. It will be simple for the ‘red cell’ at each institution to find out from the HR department which employees actually have school-age children.

• an FI activates its commercial recovery site, but discovers it can’t get all the seats it has been paying for. The MAS is particularly concerned about the capacity of the island’s commercial recovery sites (HP, IBM, Singapore Computer Systems, SingTel) to cope with multiple, simultaneous, extended invocations.

• employees and their families ask for and expect support that HR departments don’t normally provide. Examples: ‘If I catch this flu at work, will the bank provide my family with Tamiflu®?’ ‘If my spouse doesn’t want me to come to work, will I lose my job?’

Exercise price
The ABS says the exercise will cost about SGD 950,000 (USD 700,000), and that the MAS had been asked to cover half that cost. Each participating FI will contribute its share of the other half (SGD 475,000, USD 350,000), according to its license category.

Singapore’s local banks will pay top price at SGD 26,750 (USD 19,700) each, and SGX will be close behind at SGD 21,400 (USD 15,750). The six Qualifying Foreign Banks (Citi, ABN Amro, BNP, StanChart, HSBC, Maybank) will get bills for SGD 13,910 (USD 10,225) each; sixty-five other foreign banks will each pay SGD 7,490 (USD 5,500) to SGD 3,210 (USD 2,400), according to their license categories. It will be cheap – SGD 3,210 (USD 2,400)– for insurance companies, brokers and offshore banks to play. All amounts include Singapore’s 7% sales tax.

Monday, September 1 is Labor Day in the United States, traditionally the last day of summer vacation before everyone heads back to work or school. Some bankers in New York will be coming from the beach a day early for this one, I imagine.

By Nathaniel Forbes, Forbes Calamity Prevention Pte Ltd, Singapore. Posted: 29 April 2008 at 10:38 am (UTC +8 hours)