London asset managers ready for Olympic disruptions

With the London 2012 Olympic Games approaching the starting line, many of the city's investment managers are readying contingency plans to handle the expected diversions along the way.

But there's also some fun and games in store during the July 27-Aug. 12 Olympics, being held a stone's throw from Canary Wharf and the City of London — one of the world's top financial centers.

At Northern Trust Corp., for example, employees were invited to a sports day on July 17-18 to encourage “employees to create teams and get into the spirit of the games,” according to Wilson Leech, London-based CEO for Europe, Middle East and Africa at Northern Trust. The “knockout-style” tournament featured teams of 10 to 12 employees competing in events such as “Bungee Biathlon,” “Shot Put Relay” and “The Lighting of the Torch.” Gold, silver and bronze medals were awarded at the end of the tournament.

Elsewhere, the fifth floor of BlackRock Inc.'s London headquarters will be transformed into a mini “Olympic Village” between noon and 2 p.m. during the Olympics, said Jonathan Mullen, London-based managing director and head of communications for Europe, Middle East and Africa.

Competition in rowing (albeit on rowing machines), table tennis and table football, among other “sports,” are being planned with some of the company's higher-ranking executives participating. They include Chris Leonard, managing director and head of human resources for the EMEA region at BlackRock, who represented Great Britain at the 1996 World Rowing Championships and 1997 World Cup regattas. He'll face Alex Hoctor-Duncan, head of retail for the EMEA region, in the rowing event, according to a staff invitation from BlackRock's EMEA People & Culture Committee. On Aug. 10, medals will be awarded to those with the best scores.

“We're trying to balance between the need to maintain a business-as-usual environment with the realization that this is a once-in-a-generation event happening on our doorstep,” said Mr. Mullen, who decided to purchase a bicycle earlier this month in order to cycle to work during the games.

Expected to attract an estimated 5.3 million people to the city, the London Olympics “is unusual compared to previous (Olympic Games) in the sense that it's being held in one of the most confined areas closest to one of the world's largest financial districts,” said Simon Jones, senior product marketing manager at IPC Systems Inc., London, which provides trading technology and network services globally to investment banks, brokerages and money managers including hedge funds.

Compared to previous Olympic Games in recent times, “the risk of disruption to the financial sector is higher,” Mr. Jones said.

The majority of about two dozen money managers and several pension funds interviewed for this story are allowing at least some employees to work flexible hours or from remote sites, including their homes.

Others, such as Aberdeen Asset Management PLC, are prohibiting “all but essential staff travel to London” during the Olympic Games due to the higher cost of essentials such as flights and hotels.

Potential problems that managers are also facing include lower trading liquidity and possible delays in order processing, sources said.

Canary Wharf — where managers including State Street Global Advisors, Morgan Stanley Investment Management and Northern Trust are based — is just south of the Olympic Village in East London and located along the same transport links that will bring millions to Olympic venues. Elsewhere in the City of London — an area that's home to many of London's money managers including BlackRock, Goldman Sachs Asset Management, Aberdeen, Schroders PLC and First State Investments — more transport delays are expected during the games.

Some Olympic events in Central London are expected to also affect traffic in Mayfair, where hedge fund managers are clustered.

The transportation issues are what concern managers. “No one really knows what the impact will be yet,” said Gary Withers, regional managing director for Europe, Middle East and Africa at First State in London. “We've been getting strong advice from authorities that transport will be tricky at certain times of the day. In response, what we've done is we've asked people to rearrange their working hours, for example, to shift their hours or do a split-shift system if that makes sense. For those who may be finding it extremely difficult (to commute into work), we're encouraging them to do some days at home.”

The potential for disruption already has led the U.K. government to hold off its weekly bond auctions during the games. According to a spokesman from the U.K. Debt Management Office, who asked not to be named, the potential for “thinner market liquidity” led to the decision. The DMO, which is the executive agency of the U.K. Treasury responsible for carrying out the nation's debt management policy, will resume its weekly bond auctions on Aug. 16, four days after the Olympics. Larger issuances will be auctioned before and after the Olympics.

“We came to the assessment that we don't need to take on the (additional) operational risk” the spokesman said. “It's prudent planning is all.”

State Street Corp., parent of SSgA, has been working on its contingency plan since January 2011 and is well prepared, according to a spokesman who requested that he not be named. “State Street and SSgA have been developing an Olympics resiliency program to drive our preparedness for the periods before, during and after the 2012 Olympic and Paralympic Games,” the spokesman said. The London Paralympics are scheduled for Aug. 29-Sept. 9. While he declined to specify details, the spokesman said preparations included planning and testing “multiple recovery solutions available to employees in the area.”

Mr. Jones of IPC said he has been working with larger clients including investment banks and money managers to test operational networks for employees to work from home and alternative recovery sites outside of London. “This is not particular to the Olympics,” but part of companies' regulatory obligations in case of emergency, he said. Mr. Jones declined to name the clients.

For example, due to the restrictions on delivery vans within a mile of event venues, IPC is storing spare parts such as computer terminals and telephones at the offices of some of its larger clients. “Normally, we put the spares in a van and drive them to the clients,” he said. “We may not be able to do that” during the games.

In a survey conducted by IPC In April, about 76% of the asset management firms had a backup plan in place in case of severe disruptions from the Olympics. However, Mr. Jones added, “there seems to be mixed messages where traders need to work with analysts, portfolio managers and risk and compliance managers. There were discrepancies there; some thought they knew of a company plan, while others didn't.”

At Northern Trust, the company has “undertaken a number of detailed scenario planning and business continuity tests over the last 18 months,” Wayne Bowers, CEO for asset management in the EMEA and Asia-Pacific regions, said in an e-mailed statement. During the games, employees can either work at the company's offices in Canary Wharf, a dedicated U.K. Resiliency Center outside of the city, or from home.

Schroders spokeswoman Estelle Bibby said the firm is keeping employees informed through the company's intranet site, including up-to-date travel advice. “Events will be available to watch on our large TV screens in our atrium and departmental breakout areas throughout the day,” Ms. Bibby added.