The fund industry vs the Chennai floods
How CAMS and the fund houses with operations in Chennai dealt with the recent flood in Chennai to minimise delays and disruptions
The extraordinary deluge of rains that Chennai received in the first week of December, the highest in a century, proved to be a trial-by-fire for the city's disaster-management plans. And the government as well as private institutions failed the test.
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On the critical days from December 2 to 5, airports and stations were shut, ATMs were inoperable and phone and data connections were severed. Power supply failed in many parts of the city. But how did the mutual-fund (MF) industry weather the deluge?
Value Research spoke to three well-known entities in the MF industry which run significant operations out of Chennai - CAMS, the registrar and transfer agent (RTA); Franklin Templeton Investments (India), which has key fund-management and investor-servicing operations situated in Chennai; and Sundaram Mutual Fund, which is headquartered in the southern city.
They all claim to that MF investors did not suffer widespread disruption to services during the floods.
Powering the show
Any flood-related disruption at CAMS would have surely shaken up the entire fund industry because the Chennai-based CAMS runs registrar-and-transfer-agent services for nearly 60 per cent of the fund industry.
N K Prasad, the firm's CEO, says 'We were fortunate enough to maintain business continuity despite a disaster of this magnitude. All mutual-fund transactions were processed and redemption payouts were made to investors. Our AMC clients were able to declare NAVs every single day. We were also able to complete our regulatory filings within the deadlines.' CAMS' front offices were open for over-the-counter transactions too.
How did CAMS manage this, given that much of the city was under water? One reason was a fortunate location. The CAMS headquarters didn't suffer flooding because it is an elevated structure on the arterial Mount Road. But good planning played a big role too. 'We had to operate our main office for 48-72 hours just on the generator. We had stocks of diesel and kept procuring more on standby,' explains Prasad.
CAMS' elaborate business continuity plans kicked in. For one, CAMS has built high redundancy (excess capacity) into its IT infrastructure. It has four different service providers for data connections and multiple arrangements with data centres. So, when one provider had a failure, another stepped in.
Two, apart from its main centres at Chennai and Coimbatore, CAMS' investor-service centres at other locations independently handled investor requests on their own. CAMS backs up investor data at three different data centres, at its offices at Mount Road and Kodambakkam in Chennai and at Coimbatore. Coimbatore was chosen as an alternate location because it is in a different environmental zone from Chennai.
But Prasad says what surprised even him was the commitment of the CAMS staff at Chennai. 'We had people working for 72 hours without going home to keep operations running. The office arranged local accommodation. But given that most people could not even reach their families on phones, etc., this was truly a demonstration of their commitment.'
Diversification helps
Neerav Kaushik, Vice President - International TA, Asia, Franklin Templeton Investments, says that it was a combination of people, processes and technology that helped FT deliver uninterrupted services through the disaster.
'Because our investor-service operations are in-house, we had the ability to have a complete overview of what is happening at each site,' he says, adding that 'the ability to see the impact on the customer also increases the sense of ownership. I cannot undermine the commitment of our Chennai staff who came to work, despite the flooding many of them faced at their homes.'
On processes, FT's 'diversified' operations across two different locations stood it in good stead. 'About 50 per cent of our support staff sits in Chennai and 50 per cent in Hyderabad. On December 2, many of the Chennai staff could not make it to work and most calls were redirected automatically to Hyderabad. We didn't have to declare a non-business day,' he explains.
Technology-wise, FT has its main operations server at Hyderabad, with a disaster-recovery server at Chennai. The call centre at Chennai is backed up in Hyderabad. 'We have two sets of backup on all data. The servers are backing up each other every minute.' Why Hyderabad? 'Chennai and Hyderabad are in two different seismic zones,' explains Kaushik.
Given that FT has part of its fund-management team based at Chennai, how did the fund managers cope? 'Our office at Alwarpet was not flooded and people were able to work there. Even otherwise, our fund managers have the ability to work out of home or any location worldwide,' clarifies Kaushik.
Overcoming floods
While a few offices may have got away lightly, Sundaram Mutual Fund was forced to suspend its daily NAV declaration across its schemes on December 2, 2015, after the catastrophe took an unexpected toll. Sundaram Mutual has outsourced its fund-accounting and registrar-and-transfer-agent operations to Sundaram BNP Paribas Fund Services, which has offices at Chennai's Guindy Industrial Estate.
So heavy were the torrential rains on December 2 that all connectivity to the Guindy office (power supply, mobile phones, landlines) was severed within hours.
'Water levels rose quickly up to the first floor of the building. The generators in the basement quickly got flooded. Power supply was cut off and 34 people were marooned on the second floor. Our first priority was to get those people out but no transport was available. They were stuck there for 40 hours without food or supplies and were rescued through boats,' recounts Sunil Subramaniam, CEO of Sundaram Asset Management Company.
But did Sundaram AMC have a disaster-recovery plan in place? Very much so, explains Subramaniam. 'For the core operations, we have a disaster-recovery site at Mumbai. As soon as we faced problems, we were able to put the Mumbai site into operation and those operations did not suffer at all. But Sundaram BNP Paribas Fund Services has its backup site at Madurai. Because of the loss of connectivity, the transfer to the Madurai centre could not happen immediately.'
The fund immediately notified the AMFI and the SEBI and took out advertisements announcing that it could not declare its NAVs for one day on December 2. Operations were resumed the next day after staffers were relocated to the corporate office. 'Many of the staff slept in the conference hall and worked for three-four days entirely out of office,' says the CEO.
Subramaniam says that the lack of NAV did not stop redemptions. 'We made sure that despite the delay in NAV declaration, investors didn't suffer for the lack of money. Redemptions work on a T+2 basis and we have managed to honour all redemption requests made on that day,' clarifies Subramaniam, though he admits that stalled banking operations did delay credits. With the learning from this episode, the fund house plans to request its RTA to consider backups at new locations.
The extraordinary deluge of rains that Chennai received in the first week of December, the highest in a century, proved to be a trial-by-fire for the city's disaster-management plans. And the government as well as private institutions failed the test.
Subscribe to the Value Research Insight newsletter
On the critical days from December 2 to 5, airports and stations were shut, ATMs were inoperable and phone and data connections were severed. Power supply failed in many parts of the city. But how did the mutual-fund (MF) industry weather the deluge?
Value Research spoke to three well-known entities in the MF industry which run significant operations out of Chennai - CAMS, the registrar and transfer agent (RTA); Franklin Templeton Investments (India), which has key fund-management and investor-servicing operations situated in Chennai; and Sundaram Mutual Fund, which is headquartered in the southern city.
They all claim to that MF investors did not suffer widespread disruption to services during the floods.
Powering the show
Any flood-related disruption at CAMS would have surely shaken up the entire fund industry because the Chennai-based CAMS runs registrar-and-transfer-agent services for nearly 60 per cent of the fund industry.
N K Prasad, the firm's CEO, says 'We were fortunate enough to maintain business continuity despite a disaster of this magnitude. All mutual-fund transactions were processed and redemption payouts were made to investors. Our AMC clients were able to declare NAVs every single day. We were also able to complete our regulatory filings within the deadlines.' CAMS' front offices were open for over-the-counter transactions too.
How did CAMS manage this, given that much of the city was under water? One reason was a fortunate location. The CAMS headquarters didn't suffer flooding because it is an elevated structure on the arterial Mount Road. But good planning played a big role too. 'We had to operate our main office for 48-72 hours just on the generator. We had stocks of diesel and kept procuring more on standby,' explains Prasad.
CAMS' elaborate business continuity plans kicked in. For one, CAMS has built high redundancy (excess capacity) into its IT infrastructure. It has four different service providers for data connections and multiple arrangements with data centres. So, when one provider had a failure, another stepped in.
Two, apart from its main centres at Chennai and Coimbatore, CAMS' investor-service centres at other locations independently handled investor requests on their own. CAMS backs up investor data at three different data centres, at its offices at Mount Road and Kodambakkam in Chennai and at Coimbatore. Coimbatore was chosen as an alternate location because it is in a different environmental zone from Chennai.
But Prasad says what surprised even him was the commitment of the CAMS staff at Chennai. 'We had people working for 72 hours without going home to keep operations running. The office arranged local accommodation. But given that most people could not even reach their families on phones, etc., this was truly a demonstration of their commitment.'
Diversification helps
Neerav Kaushik, Vice President - International TA, Asia, Franklin Templeton Investments, says that it was a combination of people, processes and technology that helped FT deliver uninterrupted services through the disaster.
'Because our investor-service operations are in-house, we had the ability to have a complete overview of what is happening at each site,' he says, adding that 'the ability to see the impact on the customer also increases the sense of ownership. I cannot undermine the commitment of our Chennai staff who came to work, despite the flooding many of them faced at their homes.'
On processes, FT's 'diversified' operations across two different locations stood it in good stead. 'About 50 per cent of our support staff sits in Chennai and 50 per cent in Hyderabad. On December 2, many of the Chennai staff could not make it to work and most calls were redirected automatically to Hyderabad. We didn't have to declare a non-business day,' he explains.
Technology-wise, FT has its main operations server at Hyderabad, with a disaster-recovery server at Chennai. The call centre at Chennai is backed up in Hyderabad. 'We have two sets of backup on all data. The servers are backing up each other every minute.' Why Hyderabad? 'Chennai and Hyderabad are in two different seismic zones,' explains Kaushik.
Given that FT has part of its fund-management team based at Chennai, how did the fund managers cope? 'Our office at Alwarpet was not flooded and people were able to work there. Even otherwise, our fund managers have the ability to work out of home or any location worldwide,' clarifies Kaushik.
Overcoming floods
While a few offices may have got away lightly, Sundaram Mutual Fund was forced to suspend its daily NAV declaration across its schemes on December 2, 2015, after the catastrophe took an unexpected toll. Sundaram Mutual has outsourced its fund-accounting and registrar-and-transfer-agent operations to Sundaram BNP Paribas Fund Services, which has offices at Chennai's Guindy Industrial Estate.
So heavy were the torrential rains on December 2 that all connectivity to the Guindy office (power supply, mobile phones, landlines) was severed within hours.
'Water levels rose quickly up to the first floor of the building. The generators in the basement quickly got flooded. Power supply was cut off and 34 people were marooned on the second floor. Our first priority was to get those people out but no transport was available. They were stuck there for 40 hours without food or supplies and were rescued through boats,' recounts Sunil Subramaniam, CEO of Sundaram Asset Management Company.
But did Sundaram AMC have a disaster-recovery plan in place? Very much so, explains Subramaniam. 'For the core operations, we have a disaster-recovery site at Mumbai. As soon as we faced problems, we were able to put the Mumbai site into operation and those operations did not suffer at all. But Sundaram BNP Paribas Fund Services has its backup site at Madurai. Because of the loss of connectivity, the transfer to the Madurai centre could not happen immediately.'
The fund immediately notified the AMFI and the SEBI and took out advertisements announcing that it could not declare its NAVs for one day on December 2. Operations were resumed the next day after staffers were relocated to the corporate office. 'Many of the staff slept in the conference hall and worked for three-four days entirely out of office,' says the CEO.
Subramaniam says that the lack of NAV did not stop redemptions. 'We made sure that despite the delay in NAV declaration, investors didn't suffer for the lack of money. Redemptions work on a T+2 basis and we have managed to honour all redemption requests made on that day,' clarifies Subramaniam, though he admits that stalled banking operations did delay credits. With the learning from this episode, the fund house plans to request its RTA to consider backups at new locations.
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