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.
Fraud is one of Canada's most severe acts of financial criminality as the economic impact of this crime could potentially handicap an entire society. According to the Canadian Anti-Fraud Centre Annual Statistic Report (CAFC), a report established to monitor fraud with the aid of the Royal Canadian Mounted Police (RCMP), and Competition Bureau of Canada, it reported an annual loss of 74 million dollars affecting over 14,472 victims (Canadian Anti-Fraud Centre, 2014). Given this alarming statistic, it is worrisome that we as a society still ignore or turn a blind eye towards those who commit fraud as seen in the low conviction (Canada Revenue Agency, 2014), and focus our efforts on petty thefts as seen with the high rate of convictions
Overall, the work performed to test the relevant financial statement assertions and the evidence gathered has led our audit team to conclude that the confirmation issues encountered may signify that a potential for material misstatement exists. For example, the existence of a line of credit in one of the Financial institutions indicates that we need to perform further investigation to assess the reliability of the findings.
The global financial crisis affected the many advanced economies, particularly the United States. Unemployment significantly increased, people were evicted from their homes, and the search for employment was a dead end. However, Canada was not affected by the same force as the United States: “Canada’s financial sector was less affected than most advanced economies and it had the highest bank soundness rating in the World Economic Forum surveys from 2007-2008 through 2012-2013.” Despite the relatively stable status of the Canadian economy, Canada was very much involved in the review and improvement of international financial regulations. Canada was in a position to make changes to financial regulations due to their perceived experience in the matter, as Canada escaped the crisis relatively unscathed.
The years 2008 shined a light on a group of people who were considered high society. When the stock market crashed in September 2008, the world shines a spotlight on the financial corporation. Words such as hedge fund manager and financial instrument such as credit default swaps are not words not known to everyday citizens. The economic downturn forced society to ask question not normally asked.
"[The banks] were so singularly unrelated and independent of each other that the majority of them had simultaneously engaged in a life and death contest with each other, forgetting for the time being the solidarity of their mutual interest and their common responsibility to the community at large. Two-thirds of the banks of the country entered upon an internecine struggle to obtain cash, had ceased to extend credit to their customers, had suspended cash payments and were hoarding such money as they had." (Born...,12).
...anks while limiting that blame to a small number of specific banks that are not any specific listener’s bank.
The banking industry is under pressure in today’s business climate. Banks have been through big changes. There is opportunity, but there is also increasing competition. To be the preferred bank means changing “good enough” into a unique value proposition. And that means changing the way people have always done things, change on this level requires cutting edge technology. Change cannot be achieved with a simple directive or surface adjustment especially within the banking industry. It requires an innovative rethink of the entire system, in a strong partnership between bank leaders and their change agents. New systems and policies must support the strategy to be successful. The real test of a good strategy implementation plan is whether the people understand the strategy, are motivated and enabled to implement it, and actually start achieving its goals.
RadioShack Corporation's reputation suffered in the past due to an ill-managed company-wide layoff that utilized e-mail to notify employees of their termination. The poor communication choices used while handling the mass layoffs brought national attention to RadioShack. Many people found e-mail a dehumanizing method to inform the employees that they were being terminated (RadioShack, 2006). The current share price of $13.21 for RadioShack indicates that the corporate turnaround implemented by the CEO at the time of the layoffs, Julian Day, was not successful (RSH, 2011). Due to the changes in economy and corporate strategy it is impossible to assign total blame to the e-mail layoffs as the culprit in the waning success of RadioShack. Yet the national coverage of this event and the surprised response it elicited from management specialists indicate that this was not a popular decision (RadioShack, 2006). To regain a favorable public opinion RadioShack needs to mitigate the damage that has already occurred from this decision and integrate policies and procedures that prevent situations such as these from occurring again.
Understaffing, which often happens, and many calls from customers were left unanswered, led to the long-term decline in sales, as there was frustration among the customers. No rules and procedures in handling account and customer complaints showed that One. Tel was lacking in formalization in operation. One. Tel also did not run its divisions’ function properly.
The Bank also said that they are going to refund the money to all the customers that were affected by the fraud and that they are also willing to pay all the penalty fees. In my opinion, giving the clients, their money back is a good start good but that is only an external fixture. In order for them to fix the problem from the root, they need to work on it internally too.
The summary we can make after read the case study is the system down in RBS Company has make the million of customer unable to access their account. The management in Royal Bank of Scotland (RBS) have found people who have caused the problem which is the junior technician from India, who accidentally erased a massive swathe of information during a routine software upgrade...
Another major issue that they had to face was that Central Bank did not give approval to open branches in other locations.
The unions also blame fiasco because the decision to outsource much of the company IT source. The error that happen also came after the software being updated froze part of the bank computer system lost on that particular day. The day that this problem occur was in the Wednesday. The system is being recovery and the problem is solved on the Monday.
Flow of the information should have been better than this, top and bottom management didn’t work together properly resulting in failure.
This paper will first look at the need for such measures and present the current standards employed at companies. Then we will present case studies on incidents that were high-profile examples of failure in this area. The paper will then come up a more effective implementation