Hedge Funds Wise to Watch Bird Flu

"A lot of hedge funds are small, independent partnerships ?? 1/2 but just because they're small doesn't mean they don't need to plan for this," Mr. Tabb said. "Like any other financial institution they have a lot of dependencies on technology and communications to receive market data and let [investors] know what's going on with their money." Funds need to develop mechanisms that will ensure access to all critical technology in the event that the fund's primary location is inaccessible or if some employees must work from a remote location.

The situation becomes more complex given the projected effect of the avian flu, Mr. Tabb said, if it attains full-blown pandemic status–10% of the population could be ill at any given time. Firm employees may find themselves caring for sick family members, or arranging supervision of their children if schools are closed.

While that doesn't mean hedge funds should buy a full business continuity plan and implement it this very day, Mr. Tabb said, firms should now start assessing what technology will be necessary to proceed with standard business functions, what can be outsourced and which alternative service providers will be available if a primary provider becomes unreliable. Employees should be educated about the plan and alternative measures for contacting clients and conducting business as the plan goes into effect.

If the H5N1 influenza subtype proceeds into phase four, Mr. Tabb said, the necessary technologies and services should be acquired by the firm. As the virus proceeds to stages five and six, business continuity measures should be put into effect as appropriate with respect to the disease's geographic spread. In the later phases of the disease's development, this "managed transition" approach will enable firms to be prepared at a time when other companies are rushing to enact last-minute continuity solutions.

"If we hit phase five and this disease starts really spreading within the human population, it's going to be really hard to get set up because everyone's going to be trying to expand the same thing, making sure they have extra laptops available and bandwidth at home," Mr. Tabb said. "And if it hits, it's going to have a serious impact on supply chains, because it won't just hit the United States–it's going to hit China, Japan and Latin America too, so resources will be really strained."

The government will have its hands full as well. "Don't expect the government to come in and save the day ?? 1/2 resources are stretched as they are, and institutions need to make sure that they are watching out for their own interests," Mr. Tabb said.

To keep up with the spread of the H5N1 influenza subtype, Mr. Tabb suggested that hedge fund firms regularly consult the U.S. Centers for Disease Control and Prevention's avian flu web site, which keeps tabs on where the disease has been found, how it is progressing and its mechanics.

On the whole, the financial world is taking the avian flu threat seriously and is more prepared than most industries, according to Mr. Tabb. In a customer-focused business, being prepared and establishing a plan for dealing with a pandemic is critical to ensuring that a company, as well as its employees, survives.

"In the end ?? 1/2 it's about making sure that clients feel secure with you having their money and managing their money," said Mr. Tabb. "Any business like that has to make sure it's prepared for an event that could interrupt that client-focused nature. If you're managing Mr. Lee's million dollars, he's going to want to be able to get in contact with you and make sure his money is safe, and if you don't he's going to pull his money."

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Contact Bob Keane with questions or comments at [email protected].