Emergency Preparedness: Financial Resiliency When Disaster Strikes

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1 Bank of America Merrill Lynch White Paper Emergency Preparedness: Financial Resiliency When Disaster Strikes October 2014 Executive summary Financial continuity should be viewed as an integral part of any higher education institution s disaster planning. Before disaster strikes, leverage the relationship with Bank of America Merrill Lynch. Engage your client team to create, review and, at least annually, enhance your disaster plan. This ensures you are aware of and have access to any and all of the financial solutions needed to support you in a disaster situation. Your plan should be both robust and flexible, with systems tested and staff responsibilities reviewed frequently so that key personnel know exactly what needs to be done in any situation. In the event of disruption, Bank of America Merrill Lynch will be available to help you conduct business from wherever you are. Contents Understanding and rehearsing the disaster plan... 2 Planning for financial continuity... 2 Maintaining accounting functions... 2 Payroll continuity... 3 Maintaining payment functions... 3 Managing receivables... 4 Wire transfers and investments... 4 Keep your plan up to date... 5

2 EMERGENCY PREPAREDNESS: FINANCIAL RESILIENCY WHEN DISASTER STRIKES 2 Understanding and rehearsing the disaster plan Virtually every higher education institution has a disaster plan, and for good reason. When disaster strikes, colleges and universities must be prepared to protect people and property, secure the campus network, and implement effective disaster recovery and communications strategies. Within this context, financial continuity should be viewed as an integral part of any college or university s continuity and disaster recovery planning. In addition, given the unique role higher education plays within the community, colleges and universities often make crucial contributions to broader recovery operations, including marshaling resources, contacting volunteers, providing meeting locations, and more. College and university business officers and campus administrative teams should be rehearsed in responding or adapting to a variety of disaster scenarios while remaining aware of the institutions overall communication strategy and how to work within the chain-of-command. Planning for financial continuity Financial resiliency starts with liquidity, says John Lenckos, senior vice president, Bank of America Merrill Lynch. In any disaster scenario, diversification of liquidity sources is paramount. We advise higher education clients to ensure they have access to the funds they may need, whether from operating or endowment funds, a credit line, or the most appropriate combination. Given the unique role higher education plays within the community, colleges and universities often make crucial contributions to broader recovery operations, including marshaling resources, contacting volunteers, providing meeting locations, and more. To ensure your institution is prepared for every contingency, it s important to talk to your banker long before disaster strikes. Don t assume, adds Lenckos. Make sure you confirm everything that you re thinking about your financial requirements with your bank ahead of time. As with any broader disaster plan, your institution s financial continuity plan must be current, effective, continually tested, and, when necessary, updated. This process includes assigning key roles and establishing protocols and identifying backup personnel who will have authority to step in and perform financial tasks if needed. Each key employee should also have access to your Bank of America Merrill Lynch Emergency Preparedness Resources fact sheet containing key contact information and phone numbers. Maintaining accounting functions In managing through a disaster, an ounce of prevention is worth a pound of cure, says Paula Reid, senior vice president, client manager, Bank of America Merrill Lynch. Are you going to need cash? Are you going to need to meet payroll? Are you going to need to give people access to purchasing cards? We encourage clients to consider all their potential needs and talk to their client manager or treasury solutions officer early on.

3 EMERGENCY PREPAREDNESS: FINANCIAL RESILIENCY WHEN DISASTER STRIKES 3 The key to financial continuity in any disaster scenario is establishing a remote (or sister) site where data is stored and from which you can run accounting functions. Make sure all passwords and 800 numbers are on hand. Test the site regularly. For a smaller institution, the remote site could be as simple as a laptop in a treasurer or controller s home. It is also important to build some redundancy into your plan, so if a key individual is incapacitated, others are empowered and able to manage important functions. Whatever the circumstances, access to the bank s CashPro web portal will be secure, requiring the same passwords and tokens used at all other times. The necessary bank resources will also be available to assist you as needed. Payroll continuity Advance planning and a full understanding of your payroll options will ensure employees are paid in a timely fashion after a natural disaster, even if people are dispersed and facilities are offline for several days or more. Many of the solutions that benefit clients in a disaster scenario are current best practices in an everyday scenario, says Kristin Harrison, senior vice president, treasury solutions officer, Bank of America Merrill Lynch. The more you embrace secure electronic solutions, the more prepared you are going to be for a disaster. In situations where there is time to prepare, such as a hurricane or major snowstorm, you can elect to pre-date your ACH payroll run and distribute checks ahead of time. If a sudden disaster occurs, such as a tornado or earthquake, you may be unable to send the bank an ACH file for processing. If that happens, authorized personnel can instruct our ACH department to use a previous payroll file. says Harrison. With the proper instructions on file, it s as easy as a phone call. Part of disaster prep is the routine continually testing systems, and updating the responsibilities of staff members so they know what needs to be done in any situation. John Lenckos Senior Client Manager Bank of America Merrill Lynch For employees who don t have bank accounts, you still have ways to maintain continuity with payroll check alternatives such as payroll cards and pre-paid disaster cards. We offer a variety of solutions to help public and private sector clients maintain payroll continuity through any eventuality, says Tino Aurigemma, senior vice president, Bank of America Merrill Lynch. These solutions can be held at different sites, distributed to employees as needed, with secure activation through our online portal. Maintaining payment functions Even in scenarios in which facilities are damaged, electricity is lost and phone lines are down, effective planning will allow you to maintain your ability to make purchases, pay vendors and receive payments. Many institutions already use purchasing cards for regular purchases, and these will continue to function. If not already in use, purchasing cards can be stored for emergency use. Make sure you know how to contact the program administrator(s) if you need to

4 EMERGENCY PREPAREDNESS: FINANCIAL RESILIENCY WHEN DISASTER STRIKES 4 expand purchasing authority, modify spending limits or approve additional merchant category codes. Key employees may also be approved to access cash at their banks or ATMs for instance prepaid cards, draws on a line of credit, purchasing cards or withdrawals on a cash account. Keeping blank check stock in a secure location is one way to continue paying vendors and partners. Recommended alternatives include electronic payments such as ACH payments, epayables or wire payments, Managing receivables Effective financial resiliency planning will ensure that your institution can continue to manage receivables, make deposits and meet your cash needs. For an anticipated weather event, you may decide to stop depositing cash to have extra cash on hand. If necessary, get additional cash from your banking center or arrange with your bank s cash vault and armored carrier ahead of time and distribute among key areas. Your Remote Deposit Service (RDS) and web-based payments can be maintained from your remote site and you can continue to make deposits to your lockbox. (If your regular lockbox site is down, Bank of America Merrill Lynch guarantees to have another one open to receive deposits within four hours.) If needed, full-service Mobile Banking Units will be deployed to your area. These heavy-duty, vehicle style units are completely self-contained and offer the services and connectivity you need to minimize business disruption during a longer-term disaster situation. With the loss of electricity, your credit card machines may not function, so to continue receiving payments, make sure your staff knows the backup procedures. Also have a plan in place in the event phone lines are unavailable for voice authorizations, such as accepting payments from known customers only. In addition, identify key banking centers for deposits and employee check cashing and know where alternative banking centers are so staff can be directed to them in the event of closures. Many of the solutions that benefit clients in a disaster scenario are current best practices in an everyday scenario. The more you embrace secure electronic solutions, the more prepared you are going to be for a disaster. Kristin Harrison Senior Vice President Treasury Solutions Officer Bank of America Merrill Lynch Wire transfers and investments Even in the face of disaster, your institution needs to maintain its ability to transfer funds and execute investments. Critical wire transfers can be initiated from your remote site via the bank s online portal. As a backup, be sure to complete and maintain a telephone wire transfer agreement. If you need to send a wire transfer, and the only thing you can access is a telephone, we can set clients up to do that, says Paula Reid. The key is to authorize the right individuals and set up the appropriate PINs and passwords in advance.

5 EMERGENCY PREPAREDNESS: FINANCIAL RESILIENCY WHEN DISASTER STRIKES 5 If investments mature on the date of a disaster, do you have plans on what to do? Authorized personnel will need to have their token device to access the investment application. Be sure to have investment account numbers or tax identification numbers with you, along with your investment representative s phone number. As with all systems, be sure to test remote access of all necessary systems regularly. Keep your plan up to date Every disaster teaches us new lessons. Every year brings new technology innovations and solutions. As a higher education institution, it s important to keep your knowledge of best practices current, especially when it comes to disaster planning and continuity. When it comes to financial disaster preparedness, we encourage you to include your bank in your planning process, to discuss your expected needs, to explore additional what-ifs and out-of-thebox scenarios with your Bank of America Merrill Lynch higher education client manager who works closely with treasury and credit specialists also focused on higher education. Every disaster teaches new lessons. Every year brings new innovations and solutions. To ensure your plan is up to date and your institution is prepared for every contingency, talk to your banker long before disaster strikes. One of the things higher education organizations are really good at is talking to each other, says John Lenckos. We, because of our specialization, can be a valuable part of that dialogue, too. Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation ( Investment Banking Affiliates ), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and members of SIPC, and, in other jurisdictions, by locally registered entities. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed Bank of America Corporation