Royal Bank Of Canada (Rbc)

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This case discusses a crisis at the Royal Bank of Canada (RBC) that occurred on May 31, 2004. The crises involved a programming change to a vital piece of banking software. An incorrect change to the code led to the failure of the bank’s programs which in turn led to customers that could not check account balances, customers (and non-customers) that did not receive paychecks, automatic payments and bank transfers that were delayed, and duplicate transactions.

The code that was entered incorrectly was quickly fixed, but before that could happen, bad data was sent throughout the banking system that was difficult for RBC to track. As the bad data needed to be corrected from previous days, new data and transactions continued to pile up until RBC could begin processing the transactions again.

In addition to the problems caused by the technology glitch, there were issues with how the company handled the crisis with its customers. At first the bank publicly announced the problem would be resolved in three days. When that day came they needed another three to four days to continue to deal with the problem. The bank’s CEO left the country when he was told that everything would be operating normally three days after the error occurred. As customers continued to experience problems in the days after the initial problem, there was no one single person to manage the public relations with the bank’s stakeholders.

RBC’s problems provided hackers and scam artists the opportunity to take advantage of those that were affected. These crooks sent emails that tricked customers into providing user IDs, passwords, and account numbers.

In all the issue took about a month to resolve and the RBC gave customers 90 days to file claims with the bank. RBC also hired an adjuster to help with losses as a result of the problem and hired IBM to consult with the cause of the problem as well as how to prevent the problem from happening again.

The key flaws of RBC’s controls and actions in this case are:

• RBC’s lack of a quality assurance (QA) control that tests programming changes before being released to production.

• A flawed procedure for managing the back-up computer systems.

• Incorrect assumptions about when the applications would be back online which led to an ineffective public relations and information exchange between the bank and the stakeholders.

• RBC’s failure to warn the customers about potential scam artists.

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