HAGERSTOWN, Md. — On the eve of its one year anniversary, Ongoing Operations, LLC has quickly discovered that the behind the scenes, proactive work to ensure that a credit union can continue running in case of a natural disaster or operational shutdown has become a priority for many.

The painful lessons brought on by Hurricanes Katrina, Rita and Wilma in 2005 forced credit unions affected by the deadly storms to scramble and network in ways they had never done before. Out of that confusion launched Ongoing Operations, a CUSO that helps with disaster recovery, operations and business continuity services such as around the clock member support, data backup and recovery and workspaces. Since it opened its doors in February 2006, the CUSO, founded by seven Mid-Atlantic region credit unions, now has 21 clients and is near capacity at its home base in Maryland, which will be expanded.

“It's been fast paced,” said Kirk Drake, president/CEO, Ongoing Operations. “There's such a pent up need [for business continuity services] in the industry.”

Actually, the CUSO's idea was shaped more than a year before the hurricanes struck by Department of Labor Federal Credit Union, HEW Federal Credit Union, NIH Federal Credit Union, Northwest Federal Credit Union, Synergy One Federal Credit Union, Transportation Federal Credit Union, and Agriculture Federal Credit Union. The CUSO has since expanded to other parts of the country helping credit unions in New York, Florida, Texas, California and Oregon with assets ranging from $25 million to $1.7 billion.

The first year of operation saw the CUSO making sure that its fixed costs and infrastructure were solid, Drake said, adding that for the first couple of years, they didn't think they would need full-time employees. Today, they have three and plan to hire up to five more employees this year. Another facility is tentatively scheduled to open in February in the Pacific Northwest as well as a third one in the D.C. area.

Disaster recovery may immediately come to mind as the primary reason credit unions would turn to Ongoing Operations, but Drake said the process actually starts with looking at the lines of businesses, how they perform and calculating risk based on a number of factors. “The main criteria comes from the transaction risk perspective–things like if I can't make loans for a day, what is the difference I can earn on investments versus loans for three years,” Drake explained. “If I can't post share drafts or handle payroll, what can I do? How much fee income will go into refunds and how about delinquencies?”

All of these real-life scenarios are looked at in the business analysis that compares the cost of recovery with what would be the financial impact to the credit union should a shutdown occur. Drake said some plans may already be in place when the credit union signs on with the CUSO, “but that's when the work begins.” Depending on what's needed, it can range anywhere from 60 days to nine months to round out the business continuity plan. Most credit unions opt for CU Recover, a four-step program that also involves an organizational preparedness component that tests and revises based on certain outcomes. So far, the CUSO has done dry runs and that will continue.

“We've done some testing, we haven't had to stand in for people,” said Drake, who used to run disaster recovery for one of the industry's core systems. “It's quite remarkable in how having a plan helps because the most critical parts are in place. We don't advocate replicating every system or person.”

Ongoing Operations' fee structure was originally priced to serve credit unions with assets of $100 million or more, Drake said. This year, the CUSO plans to make some adjustments for smaller credit unions–those under $25 million–since they are often among those financial institutions that need the most help getting back on their feet after a disaster or disruption in service. In general, the cost of the CUSO's services ranges between $1 to $2 per member each year, Drake said. For 2006, its revenue was 40% higher than expected with most credit unions signing five-year contracts.

The CUSO also plans to offer bundled services and more guaranteed workspaces for credit unions in declared disaster areas. The D.C. area, with all of its federal government buildings, often has to deal with suspicious package scenarios. Drake said, in these cases, customer service lines can be re-routed to cellular phones and other backup phone systems. Partnerships with entities such as PSCU Financial Services, Inc. and Digital Dialogue's member service call center have brought in even more clients. The CUSO is planning more alliances, but Drake said he could not reveal details about them right now.

“The reality is the regulator is saying [business continuity] is a must have,” Drake said. “There are very specific guidelines for senior management and the board. If you're only spending [a certain amount of money] to make sure business continues, you have to ask if you're doing a disservice to your members.” –msamaad@cutimes.com

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Ongoing Operations Recovery CUSO Helps Business Continuity Move to Top of Priority List

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