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Homeland Security

Statement of William Y. Yun to the National Commission on Terrorist Attacks Upon The United States
November 19, 2003

Introduction

  • Thank you to the members of the 9-11 Commission and to all of you in attendance for giving me the opportunity to discuss my company's response to 9-11.

  • As you may know, Fiduciary Trust International and its parent company Franklin Templeton lost 87 employees in the World Trade Center attacks.

  • Fiduciary's success post September 11 resulted from a combination of:
    • an effective disaster recovery plan, in place for 14 years and well tested in the 1993 World Trade Center bombing and Y2K;
    • a strong partnership with our parent company Franklin Templeton; and
    • a strong and capable group of professionals - our employees - who worked tirelessly over many months to ensure business continuity.

  • Of the many things that 9-11 taught us, the importance of the partnership between the public and private sectors is critical to emergency preparedness. And today's hearing is testimony to the commitment to realizing the full potential of that partnership.

Background -- Fiduciary's Pre-11 Emergency Preparedness

  • Fiduciary Trust's former New York headquarters occupied the 90th and 94-97th floors in the South Tower of the World Trade Center.

  • Established DR plans early: Fiduciary created its first disaster recovery plan in the mid-1980s, largely due to concerns about power outages.

  • Offsite DR facility: Fiduciary has had a contractual agreement with Sungard, formerly Comdisco, to provide offsite disaster recovery facilities. After the 1993 bombing of the World Trade Center, Fiduciary spent five weeks at its disaster recovery facility in New Jersey.

  • Offsite data backup: As with most organizations, back-ups of our mission critical data are maintained at off-site disaster recovery facilities. Priority to the 1993 World Trade Center bombing, Fiduciary backed up trading data daily to batch tapes and delivered them to the disaster recovery facility each night.

  • Remote shadowing: After the 1993 World Trade Center bombing, Fiduciary adopted a process called "remote shadowing", whereby data is saved simultaneously in two separate locations. The practice paid off on September 11. The company was available to recover data of all the morning transactions until the attacks.

Key Issues Fiduciary Trust and Franklin Templeton Faced on 9-11

Communication with Employees and Families

  • Our first priority on 9-11 was our people - accounting for the missing, looking after the survivors, including employees and families, and communicating the status of our efforts with everyone. We took advantage of all possible communication channels to achieve that objective:
    • Franklin Templeton Command Center: Shortly after the terrorist attacks, senior executives at Franklin Templeton's headquarters in San Mateo, California, set up a command center to coordinate logistical support, facilitate the search for missing employees and establish critical communication links. These actions allowed Fiduciary and Franklin Templeton management teams to work together, primarily by telephone, until senior Fiduciary executives who were traveling could return to New York and begin to work at the disaster recovery site and, later, in the offices of Mutual Series, another Franklin Templeton company based in Short Hills, New Jersey.
    • 24-hour Hotline: Employees in Franklin Templeton headquarters volunteered for continuous 4-hour shifts to assist us in reaching out to employees and families.
    • Recorded Telephone Updates: Fiduciary established a voice mailbox to provide regular updates to employees, families and clients on missing employees and on the status of the disaster recovery effort. Recorded telephone messages from Fiduciary's Chairman and CEO Anne Tatlock were posted regularly to the mailbox and on the Fiduciary Web site to apprise employees and families of the latest news.
    • Conference calls: To address concerns and questions directly, the company also conducted a series of conference calls with employees, families and clients in the days after the attacks.
    • Regional office assistance: Fiduciary's regional offices helped coordinate the outreach, providing another point of contact when New York employees could not be reached.
    • Fiduciary Website/Message Board: With overburdened communication lines, Fiduciary's Web site became an invaluable way for the company to post messages about the status of missing employees, and for employees and families to ask questions and raise concerns. Through the Web site, management received almost instant feedback from employees and families, which proved to be enormously valuable as Fiduciary was often forced to make quick decisions in the days and weeks following September 11.

Restoring Business Operations

  • Recovery of core systems: Nearly 30 critical technology applications needed to be up and running by the time the equity markets reopened on September 17. Two criteria were essential for remaining operational: electronic recovery of the company's books and records, and liquidity.

  • Joint efforts with Franklin and technology vendors: With the help of business partners IBM and Compaq, Fiduciary Trust and its parent company Franklin Templeton were able to restore the company's core systems five hours after the attacks, ensuring that client accounts were accurate.

  • Business continuity achievements: A day after the attacks, Fiduciary was able to conduct wire transfers of cash and securities. On September 13 when the fixed income markets reopened. The company traded bonds on moderate volumes. When equity markets reopened on Monday, September 17, Fiduciary was ready to trade equity portfolios.

  • Office Space: By mid-September the company signed a 15-years lease on five floors at 600 Fifth Avenue in Rockefeller Center, its new headquarters. Employees began to move into the new offices in October 2001.

Changes in Emergency Preparedness, Crisis Management and Business Continuity Following 9-11

  • Accelerated integration: The 9-11 disaster recovery plan rapidly accelerated Fiduciary's integration with Franklin Templeton, which began soon after the acquisition on April 10, 2001. Much of the integration plan for operations and technology was completed within six months after the disaster.

  • Relocation of data center: In November 2001, the company's data center was moved from the disaster recovery facility in New Jersey to Franklin Templeton's facility in Rancho Cordova, California. As a result, Fiduciary Trust no longer had to rely on a third-party provider for this critical function. Our backup site, operations and finance groups are now spread out between New York, Florida, Colorado and California.

  • Custody transfer, new trading system: To further stabilize Fiduciary's operational environment, custody of client securities was transferred to Chase Manhattan in December 2001 and a 24-hour trading capability was established and implementation of a new equity trading system was completed across all of the company.

  • All departments have developed business continuity plans, which are updated regularly and which are reviewed by each member of each department periodically.

  • New York Emergency Management procedures have been established, and a group of senior management have been charged as the Emergency Management Team, to lead a response to emergencies in a coordinated manner.

  • Building Management for Rockefeller Center, where Fiduciary's headquarters is located, conducts fire drills at least twice a year. Fiduciary may also request additional fire drills whenever we feel they are necessary.

  • As part of our disaster readiness we perform at least two disaster recovery tests each year at our offsite recovery facility. Earlier this month, we completed our second successful test of the year.

  • Employee preparation: Employees have become sensitized to the need to be prepared, know where to find information, and communicate with management during an emergency.

Role of president and senior management, and the Board in setting the tone and leadership for emergency preparedness

  • It is essential that senior management take a leading role in emergency preparedness to underscore its importance. Our actions set the tone for how all employees respond.

  • Fiduciary's senior management updates its Board of Directors regularly on disaster recovery procedures and testing.

  • At the same time, all employees have to be participants in emergency preparedness for it to be successful. That's why we've established department business continuity plans, and an Emergency Management team comprised of individuals in all key functions.

  • The more intangible, but equally important factor in emergency preparedness is the company's culture. On 9-11, Fiduciary employees were able to act independently and make decisions that were consistent with those being made elsewhere in the organization, and I attribute that to our history as a very tightly knit organization where employees take responsibility and care for one another.

Recommendations for other companies

  • Employee safety first: The safety of your employees must be your number one priority. Your emergency management team should work with the applicable building and police and fire officials to determine the most appropriate course of action for employees based on current facts and circumstances.

  • Keep emergency plans up to date and test them frequently: Emergency and disaster recovery plans are only as good as they are recent and actionable. Everything from contact phone numbers to procedures should be reviewed periodically to ensure accuracy and relevance. You should also conduct disaster recovery exercises regularly to test your plans and the assumptions behind them.

  • Communication - with your employees, your clients, and other stakeholders -- is essential during a disaster. Take advantage of all the tools at your disposal - telephone, Web, email and personal networks, and communicate status updates as frequently as is practicable.

Role of the public sector in helping Fiduciary Trust with emergency preparedness. What else can be done?

  • With its own disaster recovery plans as a foundation, Fiduciary Trust, like many companies, relies on a network of organizations to ensure emergency preparedness:
    • Building management
    • City and state public officials, including fire and police
    • National security organizations, including the Department of Homeland Security

  • It is critically important that communication tools operate during emergencies, and the highest priority should be placed on developing and maintaining redundancies with respect to communication tools. This priority would seem to require a unique partnership between the private and public sectors, with respect to the communication infrastructure.

  • More forums like this one where the public and private sectors can share their experiences and discuss best practices would help ensure a more effective, coordinated response to future emergencies.

    William Y. Yun is the president of Fiduciary Trust Company International. Mr. Yun has overall responsibility for all investment management and research activities at Fiduciary Trust, a wholly owned subsidiary of Franklin Templeton Investments. In addition to his investment responsibilities, he oversees Fiduciary's international offices. Mr. Yun is also president of Franklin Templeton Institutional, the business development group responsible for Franklin Templeton's institutional business. He is on the Board of Directors of Fiduciary Trust, and serves on the company's Management Committee as well as its Global Investment Committee and its Investment Policy Committee. Prior to his election as president of Fiduciary in 2000, Mr. Yun served as an executive vice president and oversaw the firm's global equity division. Mr. Yun joined Fiduciary in 1992 as a portfolio manager and analyst specializing in international equity securities. His prior work experience includes both asset management and investment banking at Blyth Eastman Paine Webber, First Boston and CB Commercial Holdings. Mr. Yun is a chartered financial analyst, and a member of the New York Society of Security Analysts. He has an M.B.A. from The Amos Tuck School of Business Administration at Dartmouth College, and a B.A. from Harvard University. He currently serves as chair of the Christ Church Day School in New York, and is a trustee of the South Street Seaport Museum in New York.



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