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Did Information Systems Cause Deutsche Bank to Stumble?

Info: 1444 words (6 pages) Essay
Published: 12th Oct 2021 in Banking

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Case Summary & Key Issues:

Deutsche Bank, founded in 1870 is the best financial institution in Germany.

Unfortunately, due to the sophisticated changes in the banking industry, they are suffering and encountering many difficulties. The bank's lack of knowledge of information systems leads to several complications. This was driven by their failure to make informed choices about strategy, investment, and how to better designate capital for technology. The Commodity Futures Trading Commission reported that the reason Deutsche Bank faced this problem was their insufficient continuity of operation and no recovery plan. Moreover, Deutsche Bank was very costly to run and the U.S. regulators confirmed that the out-of-date technology of the organization was why the bank was unable to provide precise details. Deutsche bank had undergone a lot of merging and expansion, but to integrate their information systems, they didn't make the necessary modifications. The required efforts and costs were very high, so the bank proceeded to use the outdated technology. As there were competing and contradictory technology systems and software applications, this led to what experts called "spaghetti balls". While their control framework was strengthened, the IT technology modernized and all the obsolete computers and software programmes replaced, the bank still struggled to achieve stability and benefit. In order to remain at the top, the bank needs to adapt to emerging technology platforms and applications.

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Case Questions:

1) The issue highlighted by Deutsche Bank was its poor information systems and somewhat obsolete technology. This led them, to use older information systems to control work that wasn't consistent with this system. Many management teams were needed by Deutsche bank to figure out the new information systems, but they weren't able to, so they decided to use older information systems. Ongoing issues with the data field were exacerbated by the frequent shutdown of systems and this led to Deutsche Bank experiencing several financial problems. Multiple factors have led to this problem. Management wise, the bank failed to monitor the staff in charge of reporting swap data. The bank wasn't periodically recreated, and, the changes required to combine the information systems along with investments didn't occur. In addition, this company has contributed to this issue as they haven't offered any successful solutions and haven't been able to function as a team, resulting in a loss of revenue. Furthermore, because of its unpredictable and out-of-date information systems, technology was a major contributing factor to the problems that Deutsche Bank faced. Consequently, they were unable to prepare error-free data to accurately manage their business.

2) At Deutsche Bank, the role of information technology was critical. It was accustomed to handling numerous corporate activities, such as reporting swap results, storing legal entities, and managing financial derivatives. In addition, it was relied on to spot any form of misconduct. It was correlated with the operational efficiency of the bank because it did not provide its regulators with high quality, resulting in a low degree of operational efficiency. Information technology was negatively linked to the bank's decision-making capability and business objectives because the systems didn't enable information to be effectively circulated among other departments or provide a consistent overview of bank operations to senior management. The consequence of this is always a lack of proper communication that inevitably leads to insufficient decision-making. It is clear that information technology, along with information systems, has caused Deutsche Bank to face a variety of recent challenges.

3) As they had more than 100 separate booking systems for trade in London, Deutsche Bank didn't use technology effectively to implement its business strategy, and because each system used a different number or code, it was very difficult to recognize each client within the system. In February 2018, the bank announced that it had a loss of $900 million for 2017, the third annual loss in a row. Their defined business plan was to place teams against each other, but the outcomes were ineffective, leading the bank to collect data by hand from the systems. It was extremely unsuccessful and inefficient with the technology they used as the outdated technology was unable to provide crucial information required by the bank to handle any problems that may occur. In today's day and age it's extremely important to stay up to date with technology, but due to Deutsche Bank not modernizing their IT systems early on, their bank was endangered.

4) The re-engineering of the bank's information systems and operations was suggested to

Deutsche Bank. If they use the trial and error method, it would be a very effective solution as Boeing used this method and it has shown hopeful results. Boeing used this strategy of trial and error by launching aircraft by watching them crash and attempting to learn from their errors. Similarly, if Deutsche Bank were to use this approach for their IT systems, their errors would be minimized and some promising outcomes could be achieved instead.

Relevant Research and Commentary

Upon doing further research, I found out about the largest commercial bank in India named SBI (Deb, 2020). In December 2020, YONO (SBI mobile application) had been impacted due to a system outage. Approximately 55% of the bank's transactions are done digitally and half of those transactions are through YONO so this outage impacted hundreds of customers (Shukla, 2020). The bank tried to resolve this situation by making some minor changes, however, the information systems were designed over a decade ago. This bank should've kept systems up to date with the latest technologies as they faced technological glitches due to their usage of older systems. The old systems were unable to handle large digital transaction volumes (Saxena, 2020). However, this isn't the first time that SBI has faced a system outage. They have been having system outages almost once a month due to their old information systems. Furthermore, they said the reason they continuously experienced more outages was due to them upgrading their internet banking system (Gill, 2020). Similar to

Deutsche bank, SBI didn't make any technological changes early on causing complications.

References

Deb, A. (2020, December 3). SBI's YONO hit by a system outage, restoration process underway, says bank. Retrieved January 26, 2021, from
https://www.timesnownews.com/business-economy/companies/article/sbis-yono-hit-by-a-system-outage-restoration-process-underway-says-bank/690106

Gill, P. (2020, December 03). SBI's mobile banking app is down for the third time in 30 days - digital services take a hit for the 25th time this year. Retrieved January 27, 2021, from
https://www.businessinsider.in/tech/news/sbis-mobile-banking-app-is-down-for-the-third -time-in-last-30-days/articleshow/79548953.cms

Saxena, R. (2020, December 03). After HDFC Bank, SBI YONO Faces Technical Glitches. Retrieved January 27, 2021, from
https://www.bloombergquint.com/business/after-hdfc-bank-sbi-yono-faces-technical-glitches

Shukla, S. (2020, November 3). After HDFC Bank, now SBI's YONO hit by a system outage. Retrieved January 26, 2021, from
https://economictimes.indiatimes.com/industry/banking/finance/banking/after-hdfc-bank-now-sbis-yono-hit-by-a-system-outage/articleshow/79548388.cms?from=mdr

 

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