What should hedge fund advisers know about business continuity plans?

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CHHS’ Michael Vesely explains critical elements hedge fund advisers should consider when developing a business continuity plan.

Excerpt:  Michael Vesely, a Senior Law and Policy Analyst with the University of Maryland’s Center for Health and Homeland Security, said that in developing a BCP, hedge fund managers would be well advised to distinguish between functions that are critical and functions that can be suspended during a crisis. “Essential functions have to be restored immediately and these functions are really what business continuity plans focus on – ensuring that the fund can carry out those functions for whatever temporal period is defined in the plan,” Vesely explained. “At the end of that period, the fund will then focus on restoring those systems that they deemed non-essential and that may have been suspended.”

Essential functions may include: continuing market analysis to make sure investment theses remain applicable to changed facts; staying in touch with investors; ensuring bills for critical services are paid on time; and ensuring continued network security.

Select Key Personnel to Develop and Implement the Plan

Vesely further noted that a BCP should identify persons who will serve as crisis leaders and be responsible for putting the BCP into practice (including communicating with fellow employees, guiding employees to alternative locations, and other tasks). “In a crisis, you want to make sure you have people in leadership roles who can and are willing to make sure the plan is followed and can delegate responsibilities to other employees and distribute important information to employees, clients and business partners during that time,” Vesely said.

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