Royal Bank of Canada Case Study - Free Essay Example

The Royal Bank of Canada experienced some fundamental managerial errors in May 2003. It was reported as a major â€Å"glitch† that had been caused by wrong configuration during the installation process. A simple problem had severely affected the lives of millions of people. In this essay I will discuss the security and control problems such as the simultaneous upgrade of both the main and back-up systems. This will lead into the strategies management could have used to prevent these problems happening in the first place and what they can do differently in future. I will also explain how management neglected the public relations side of the issue which had customers questioning the reliability and stability of Royal Bank of Canada ultimately leading to disloyal customers. Finally this essay will argue how well Royal Bank of Canada responded to the computer software issue and what they should have done differently to prevent the problem and ease the situation once it had happened. From the errors and mistakes made from the Royal Bank of Canada, other banks and industries can learn how to avoid them. One such bank in Australia is St George, in depth I will discuss the risks of malfunction or abuse customers may experience when dealing with the information systems with reference to relevant case studies. The Royal Bank of Canada was founded in 1864, and in just over a century had grown its total assets to over $413 Billion, had 60,000 employees and served 12 million customers. The Royal Bank of Canada set the benchmark in its industry and as you would expect was the first bank in Canada to install computer technology. On Monday, May 31, 2004 Royal Bank of Canada information technology staff made a programming upgrade which was designed to significantly improve the banking software. Unfortunately during the installation process, according to Martin Lippert, Royal Bank of Canada’s vice chairman, the glitch in the banks computer systems â€Å"was most likely caused by a single worker entering ‘a relatively small number’ of incorrect codes during the update. † You may ask, â€Å"Where was the security and control to supervise this critical procedure? This basically caused the system to crash, and to make the situation even worse managerial and control procedures that were intended to make fix the problem only exacerbated it. This caused a domino effect in the build up of work which meant the repairs took longer than expected and Royal Bank of Canada was struggling to make up the lost ground. Stakeholders in the Royal Bank of Canada were furious with the inconvenience and we re demanding answers to their problems. The first question most people asked was, â€Å"why weren’t backup systems used to maintain the flow of business operations while the main systems were down? And, â€Å"When was the problem going to be fixed!? † These issues were generated primarily due to the fact that operational control procedures contained fundamental errors. It’s concerning to discover that the CEO, Gordon Nixon and information technology specialists oversaw two fundamental errors. One, the new software should have been carefully tested before the installation process began – a critical flaw in which the organisation failed to pick up on even though its clearly stated in its policy to do so, and two, the upgrade should not have been simultaneously installed on both the main and backup systems. This would have voided the whole situation because the Royal Bank of Canada would still have had their backup system operating in the event of a malfunction. In defence of Royal Bank of Canada they did manage to fix these problems promptly and announced on the 8th on June 2004 that they had resumed normal business practices. However, Royal Bank of Canada came under heavy criticism for the way in which they handled the public relations. The chaos from within the organisation was made transparent to its customers, this made them feel nervous about the stability and security of their finances. In retrospect, I believe that the Royal Bank of Canada should have handled its public relations differently. It shows a lack of integrity and signs of incompetency when promises are not kept and policies are not adhered to. For example, the Royal Bank of Canada had assured that all systems and accounts would be normalised by Thursday, June 3rd. However, people were still experiencing difficulties with their accounts later in the week. The cumulative effect of its errors was widespread. Hundreds of thousands of other workers around Canada ran into similar delays or difficulties accessing their deposits. These people affected may have responded better to the delays had the main figure (George Nixon) of the Royal Bank of Canada been present to make the announcements. Overall the Royal Bank of Canada dealt with the computer glitch reasonably well. It was fixed quickly and effectively. For most customers it was only a matter of not having their account figures displayed at their fingertips which they were so familiar with, and the minority who did struggle, such as a law firm executive assistant by the name of Andrea Mitchell, was forced to ask her employer for a cash advance to make up for her temporarily lost pay check. Following the announcement that the bank had resumed normal business practices, they began the process of clearing up any banking fee errors, and resolved discrepancies from service charges and overdraft interest. They indicated that all accounts should be reflected accurately in customers following statements. To do this accurately RBC hired Crawford Adjusters Canada as its â€Å"administrator for non-banking related costs and losses in the banks processing disruption. The bank made claim forms available, by phone and on the internet and set a deadline of September 30, 2004 for customers to file claims. RBC handled claims under $100, leaving larger claims to Crawford. In addition RBC issued a formal apology and created a segment on their official website dedicated to detailed explanations of the computer problem which was kept updated throughout their progress. RBC also recruited IBM as a consultant to investigate the causes of the problem and provide guidance on how to avoid such problems with future transitions in technology. These precautionary measures, prompt help, and the simple claims to adjust banking errors went a long way in restoring the faith and loyalty between the bank and its customers. Any bank in the world can look at this case study and take something out of it. From an objective view, one obvious lesson to learn is ‘Don’t cut corners’. The Royal Bank of Canada somehow skipped out one critical procedure in the early stages of the upgrade in technology. There was a policy in place that stated â€Å"test the software before its installed. † How management failed to notice this was a basic error. Here’s one lesson Banks in Australia can implement, â€Å"be pedantic about following policies. † Also when dealing with change within an organisation ALWAYS have a backup plan. In the case of RBC they had no backup plan in the case of a malfunction in the computer systems. There are also procedures where RBC proved its competency and excelled in areas such as the great customer service it provided shortly after the commotion such as the website that was devoted to detailed explanations of the problem and updates on the progress of restoring its records. The bank also made claim forms available, by phone and on the internet for customers who had been affected as a result of the disruption or incurred bank fee errors. All Australian Banks can look at this example and derive various lessons, whether it be new security measures or new public relations strategies, all of these lesson’s can ultimately reduce the risk of one such event reoccurring. In conclusion, I believe the Royal Bank of Canada was able to move forward and learnt a lot from their mistakes. The mistakes were obvious and perhaps done out of indolence. The collapse of the banks computer system was caused by an error in the coding during installation. If the policy was adhered to and security procedures were controlled and supervised this fundamental error could have been negated. In connection to this, from a managerial perspective, the flaw of both systems being simultaneously updated should have raised an alarm. This was the second critical error that contributed to the disruption in banking systems. These simple errors in procedures had huge repercussions that should have been overseen by management. However what was done was done. The Royal Bank of Canada had an escalating task on hand to mend the situation. They had to restore the accounts and repair the trust in their customers. In the immediate aftermath, management and staff in general were confused and somewhat lost as to when the systems would be up and running again. It may have been optimistic or just naive to announce all systems and business would resume as normal within three days of the malfunction. In regards to that, this was the only flaw in providing customers with misleading information. Therefore the Royal Bank of Canada in my opinion handled all other areas of customer service reasonably well and was able to provide its customers with the help they needed. * Find and discuss references to Australian banks dealing with the risks of malfunction or abuse of their customer oriented information systems. ANZ employs various security measures to ensure that your transactions and personal information are protected. However, you as a customer can also play a big part in protecting your banking and personal information by looking out for the following; (â€Å"Internet Fraud Security Threats†) Phishing . Phishing is a scam where hackers fish for your personal details by using hoax emails claiming to be from financial institutions. This method continues to be favored by online thieves. (â€Å"Internet Fraud Security Threats†) Spyware 2. Spyware is a type of software that covertly collects user information while on the Internet. Viruses and Worms 1. An email vir us is the latest type of computer virus. It is transported through email messages and usually replicates by automatically distributing itself out to all contacts on the victims email address book. 2. A worm is similar to a virus. It exploits computers in a network that contain security holes. Once a security hole is found, the worm will attempt to replicate itself from computer to computer. Like viruses, worms can be equally destructive. (â€Å"Internet Fraud Security Threats†) Trojans. 1. Trojan is a destructive program that poses as a harmless application. Unlike viruses, Trojans do not replicate themselves and do not need a host program to attach to. (â€Å"Internet Fraud Security Threats†) ANZ’s goal is to provide its customers with the simplest and most effective banking services possible. The ANZ Fraud Money Back Guarantee means that if you suffer a loss as a result of a fraudulent transaction on your ANZ card, ANZ will credit your account with the amount of the loss provided you: (â€Å"ANZ The ANZ Fraud Squad†). * Didn’t contribute to the loss; and * Have notified ANZ promptly of the fraud. Credit Card Security ANZ credit cards are designed with the latest technology like ANZ Falconâ„ ¢ to help prevent fraud. As youll see below, theres also a wide range of other security measures to help protect your card including micro-chip technology, choice of pen or PIN, Verified by Visa, MasterCard SecureCodeâ„ ¢. â€Å"ANZ The ANZ Fraud Squad†). ANZ Falconâ„ ¢ worldwide credit card security 24/7 If we notice some unusual purchasing activity on your credit card via ANZ Falconâ„ ¢, well contact you to check that everything is in order. (â€Å"ANZ The ANZ Fraud Squad†). Pen or PIN? Authorising your credit card purchase is now a more se cure process with your choice of either a signature or PIN (Personal Identification Number). (â€Å"ANZ The ANZ Fraud Squad†). Security chipped cards Micro-chipped cards make it harder for credit card thieves to fraudulently copy your card. â€Å"ANZ The ANZ Fraud Squad†). Verified by Visa and MasterCard SecureCodeâ„ ¢ If youre shopping online, you can enable your card with these services that require a password and unique message to authorise purchases. With ANZ Falconâ„ ¢ security, Online shopping guarantee, micro-chip technology, choice of pen or PIN, Verified by Visa, MasterCard SecureCodeâ„ ¢ and ANZ CreditCover PLUS insurance, your ANZ credit card provides you with more protection than ever before. Now you can shop with confidence online, over the counter or over the phone. As you can see there are numerous security measures banks now have to carry out due to the increase in fraudulent behaviour. It’s not necessarily people who have become more deceitful it’s just that developing technology makes it so easy for fraud and con artists. This is why banks are always developing new security measures to keep one step ahead. (â€Å"ANZ The ANZ Fraud Squad†). Word Count: 1871 Bibliography 1) ANZ The ANZ Fraud Squad. URL: https://www. anz. com/auxiliary/security-centre/fraud-security-centre/fraud-squad/. ) â€Å"Internet Fraud Security Threats† URL: https://www. anz. com/auxiliary/security-centre/fraud-security-centre/protect-yourself/identifying-fraud/internet-fraud/ 3) â€Å"Royal Bank of Canada’s Software Woes Case Study† URL: https://www. pearsoneducation. nl/Laudon_9/pdf/E%20Case%20h9. pdf 4) Personal Banking Services RBC Royal Bank. URL: https://www. rbcroyalbank. com/personal. html. 5) â€Å"2008, Royal Ba nk Of Canada Annual Report† URL: https://www. rbc. com/investorrelations/pdf/ar_2008_e. pdf 6) Ian Austen, â€Å"Bank Software Woes Leave Many Canadians Without Money,† New York Times, June 7, 2004; 7) â€Å"RBC Admits Human Error, Scam Artists Act,† Ottawa Business Journal, June 10, 2004; 8) Lindsay Bruce, â€Å"RBC Glitch Still Not Ironed Out,† ITWorldCanada. com, June 7, 2004; 9) Chris Conrath, â€Å"Anatomy of a Snafu,† ITWorldCanada. com, June 11, 2004; 10) Paul Waldie, â€Å"RBC Calls in Help,† Globe and Mail, www. theglobeandmail. com , accessed June 19, 2004; 11) Mel Duvall, â€Å"RBC’s Account Imbalance,† Baseline Magazine, July 1, 2004; and CP, â€Å"RBC Still Making Up for Glitch,† London Free Press, www. canoe. ca , accessed June 19, 2004.