Global IT Outage: A Wake-Up Call for Financial Markets

On 19 July 2024, the financial world was thrown into chaos as a global IT outage caused widespread disruption across multiple sectors. More than 5,000 flights were cancelled, healthcare services were disrupted, and potential payroll problems loomed large. The culprit was a rogue software update by CrowdStrike which led to Microsoft system errors and resulted in numerous "blue screens of death" the world over.

The ripple effects of this outage were felt deeply within the financial industry. The LSEG's regulatory news service (RNS) went down, and its data platform Workspace was affected. Across Europe, major indices including the French CAC 40, German DAX, and Swiss SMI all saw declines. Traders reported that while exchange order books were operational, execution software used by brokers encountered issues, leading to limited trading.

The disruption wasn't limited to exchanges. Major financial institutions like JPMorgan saw employees unable to log into the bank's systems. This widespread impact underscores the vulnerability of our increasingly interconnected financial infrastructure.

This incident brings to light the critical importance of operational resilience in financial markets. A recent IOSCO report revealed that between 2018 and 2022, there were 42 market outages on listing trading venues. The report emphasises that "the resilience of trading venues is vital to the smooth operation of global capital markets".

Regulators in Europe had already identified the potential for risk, hence the EU's creation of the Digital Operational Resilience Act (DORA), setting uniform rules for financial entities across the EU. With a compliance deadline of January 2025, DORA aims to address the increased risk posed by the failure of critical suppliers in our digitalised financial landscape.

Organisations need to prioritise building of resilience into both our physical and digital economic systems. "The logic of mapping, contingency building, and collaborating holds for mitigating most concentrated risks,” advised the Financial Times shortly after the event. “Last Friday’s software snag is a critical reminder that building resilience into our physical and digital economic systems is essential, and should not be postponed. This will come at a cost, but will bring the benefit of insuring against even costlier threats.”

This incident should be seen as a wake-up call for the financial industry to reassess and strengthen its technological infrastructure, ensuring it can withstand and quickly recover from unforeseen disruptions in our interconnected global markets.