Last Friday, a massive IT outage affected users of Microsoft. The editor takes a quick look at early lessons and, in particular, the need for resilience and recovery plans.

Late last week, a tech outage swept the globe, shutting operations for banks, media companies and emergency services, and forcing airlines to ground flights. Users of Microsoft were affected. Organisations such as Sky News and the London Stock Exchange were hit. According to the Wall Street Journal and other media today, the Federal Aviation Administration issued ground-stop orders for several major airlines, including Delta Air Lines, United Airlines and American Airlines.

It turns out that Windows computers and tablets crashed in a range of countries. Reports said the problem appeared to have been caused by an update from CrowdStrike. People have referred to an error message related to Crowdstrike on affected devices, and a subsequent workaround that was aimed at deleting a CrowdStrike file. As far as is known, this doesn’t appear to be caused by a malicious attack. 

However, whatever finally emerges from this episode, along with all the other examples of hacker-induced disruptions – or the UK’s scandal at the postal service (involving wrongful punishment of people because of a systems glitch) – must surely remind the banking and wealth management sector of the need to keep systems resilient and reliable. Recovery plans must be in place. Like a fire or first aid drill, getting ready for a major outage must be rehearsed. Preparation is vital: I recall reading a 2024 book by UK academic Stephen Davies (Apocalypse Next), in which he talked about calamities that can hit, such as a massive solar storm strike affecting electrical systems on which we all rely. There may not be a lot of votes for politicians to address these threats ahead of time, but they ought to be on the agendas of those in business and public policy who are paid to think about them. 

As I know from talking to those in the sector, so much focus these days is on wealth managers, banks, family offices, advisors and others putting their IT systems “on the cloud.” Microsoft, like fellow “Magnificent Seven” big US tech Amazon Web Services (AWS), is a big player in this multi-billion dollar sector. With AI all the rage – also requiring vast amounts of electricity – the Microsoft problems are hopefully a wakeup call about resilience. (Outsourcing and the use of cloud computing are topics for the upcoming Tech & Ops report being prepared by the publisher of this news service.)

The sort of questions that chief operating officers, chief technology officers and others should be asking is what sort of backup plans do firms have if or when something like this recurs? Can data, such as the private financial information of clients, be kept secure and, where possible, accessible? Also, do those who support digitalisation of the banking and wealth value chain, and entities such as central bank digital currencies, realise potential vulnerabilities? If an economy goes cashless, what happens if payment systems go dark for hours? 

We have become very used to being interconnected, 24 hours a day, seven days a week. At a click of mouse or touch of a screen, we can check investment portfolios, see flight schedules, make video calls with a colleague or relative, check blood test results, or reserve a restaurant table. This is now the norm. Thirty years ago, some of this belonged to Star Trek, not daily life.

The pandemic and associated lockdowns of 2020-21 only reinforced our reliance on technology. I can remember those endless months of being stuck on Microsoft Teams, Zoom and other channels. It is unlikely that lockdowns would have been tolerable for as long as they were without remote working tech such as this. The “laptop class” that tends to set the tone of political debate would not have accepted it. 

While just-in-time stock inventory systems were disrupted by Covid-19 for a while, they’ve proved remarkably resilient and adaptable, and tech is a big part of why. One of the reasons why there is so much concern about rising US tariffs and China’s stance towards Taiwan (a major silicon chip manufacturer) is because it highlights how delicate and important in some ways, global trade links can be. Wealth management has prospered mightily from this “silicon” world, but how many of us, including those in public policy as well as private commerce, can always grasp this?

Hopefully by the time this week is over, some if not all of the problems that have erupted since yesterday will be put right. The ability of modern big business to handle such matters never fails to impress me (think how a typical state organisation adapts by comparison). Already, in pre-market trading, shares in Microsoft and CrowdStrike Holdings were down today. That’s capitalism in action. 

Microsoft, along with other Magnificent Seven big technology firms – Apple, Google parent Alphabet, Amazon, Nvidia, Meta Platforms and Tesla – are in many ways intertwined. They all, to varying extents, rely on the phenomenal growth of the internet, of computing power, and enthusiasm for all things digital. They’re also, let it not be forgotten, dependent on cheap and reliable energy – which is why they require policymakers not to mess things up in their quest for net zero by making energy far more costly.  

Whether they invest in Big Techs, or rely on their services, wealth managers have much to ponder from this episode.