Royal Bank of Canada: Case Study

Topics: Credit card, Computer, Bank Pages: 7 (2352 words) Published: September 16, 2010
The Royal Bank of Canada experienced some fundamental managerial errors in May 2003. It was reported as a major “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 “was most likely caused by a single worker entering ‘a relatively small number’ of incorrect codes during the update.” You may ask, “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 were demanding answers to their problems. The first question most people asked was, “why weren’t backup systems used to maintain the flow of business operations while the main systems were down?” And, “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...

Bibliography: New York Times, June 7, 2004;
7) “RBC Admits Human Error, Scam Artists Act,”
Ottawa Business Journal, June 10, 2004;
8) Lindsay Bruce, “RBC Glitch Still Not Ironed
Out,”, June 7, 2004;
9) Chris Conrath, “Anatomy of a Snafu,”, June 11, 2004;
10) Paul Waldie, “RBC Calls in Help,” Globe and
Mail, ,
accessed June 19, 2004;
11) Mel Duvall, “RBC’s Account Imbalance,” Baseline
Magazine, July 1, 2004; and CP, “RBC Still
Making Up for Glitch,” London Free Press, , accessed June 19, 2004.
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