Fire Drills for a Euro Meltdown

It’s 9 a.m. on a Friday in June, and for an emergency response drill at Legg Mason’s Baltimore headquarters, Greece has just abandoned the euro. Gathered around a conference room table, with team members from offices in London, New York, and elsewhere joining by video, 15 employees are given eight hours before markets open in Asia to assess issues such as whether they can execute trades, the status of the firm’s investments, and how workers in European offices will be paid.

Almost four years after the bankruptcy of Lehman Brothers Holdings froze the financial markets, asset managers Legg Mason, State Street, Vanguard Group, and others are drawing lessons from that crisis to prepare for a worst-case scenario in Europe. They’re assembling special teams and testing information technology systems to avoid being blindsided by the disintegration of the euro, however remote—or imminent—that possibility might appear. “We don’t know what’s going to happen but want to have all the tools to deal with whatever may happen,” says Joe Carrier, director of enterprise risk at Legg Mason. “Post-Lehman, we realized that things that you would never imagine would catch you, did catch you.”