Disaster Recovery Issues in the Banking Sector

3247 words (13 pages) Essay

18th May 2020 Banking Reference this

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Introduction

Disaster is any unexpected event that can significantly put any organization at risk by interfering with operations. Disaster recovery is the process of continuing  normal work of operations following a disaster by recapturing access to data, hardware, software and networking equipment. However, if the working location is damaged , then activities may also broaden to other options  like finding different work locations, reestablishing  communications for  an       employees.Disaster recovery response should follow a disaster recovery plan where a set of procedures developed specifically to prepare the organization to recover in the shortest possible time during a period of acute stress.

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I am currently working with Ridgewood Saving Bank as a Savings Counselor. I understand the significance of disaster recovery in the banking sector. Disaster recovery planning devises plans for the restoration of computing and communications services after a power loss, and natural disaster have disrupted them. So, during the SMAC, I will be highlighting that issues because disruption of service effects the customers a lot in our industry and then finally comes up with a plan that how to deal with disaster as per banking rules and regulations.

 

Branch Operation

Branch Operation Department is of significance in the banking sector. Banking operations officers are responsible for all day to day operational activities at banks. These banking officers  overlook different  bank departments , and they ensure all financial  transactions are running smoothly. Branch operation managers also concentrate on improving the bank& customer service record and intervening when problems arise.

The Branch Operations Department, which consists of the retail banking branch network, is responsible for providing banking services to customers efficiently and reliably consistent with government regulations and bank policy and procedures. This plan addresses will address the important issues of disaster recovery in banking sector.

Level of Service in Branch Operations

First of all we will look at level of services that is affected in case of disaster recovery and the plan to resolve that issue.Below is the description of a financial institituion’s branch operation disaster recovery plan. Levels of Service Delivery to the bank’s customers can be affected in different ways by the following scenarios:

A) Loss of Facility

B) Failure of System

C) Loss of File Server

D) Loss of WAN

E) Staff Shortage

F) Loss of System

I)       Loss of Facility

II)    If a disaster occurs at one or more of  the branches and it becomes inopenable, customers will be advised to go to the nearest branch location to perform their banking.

III) If the branch is closed for any type of emergency situation a letter must be sent to the New York State Department of Financial Services explaining the circumstance as to why the branch was closed.

IV) In the event that a branch will be rendered inoperable, arrangements could be made, to have the Mobile Branch available for customer transactions 2-3 days each week*. Additionally, if a major disaster occurs at one or more of our branches and it appears to be for an extended period of time, the branch and its staff could set-up a temporary facility in the general area, determined by Senior Management, to assist the Bank’s customers with questions and direct them to the nearest open branch location.

V)    *Mobile Branch scheduled locations would need to be changed and notification made to the New York State Department of Financial Services.

B)  Failure of System
In Ridgewood Savings our main software that handles all banking operation is DNA that is operated by FISERV,that  has an in house recovery center located in Lewisville, Texas. FISERV indicates that this Lewisville location is a mirror image of the Cherry Hill data center allowing recovery time in 24 hours. Refer to Teller Procedures in Offline Mode contained within this plan for detail on how to operate when the core banking application is not available in regular production mode.

B) Loss of System

 There is back up of the software that is used to run the banking system efficiently. There is a Teller Procedures in Offline Mode on how to operate when the core banking application is not available in regular production mode.

C) Loss of File Server

The failure of the file server has a significant impact on the delivery of banking services to our customers. In the event of such damage, the Information Systems Department would make every effort to bring the affected server back online. The Information Systems Department would attempt to resolve the problem via telephone or respond to the location if necessary. The IS department would be responsible for determining if the server can be repaired by contacting HP for service. If it is determined that the server cannot be repaired, IS personnel will replace the affected hardware with spare/recovery equipment as available.

D) Loss of Data Circuits (WAN)

If online communication to the host is lost as a result of telephone data line problems, the branches are equipped with VPN backup lines. Upon a circuit failure, network equipment will automatically switch communication to VPN into one of the HUB locations, and then pass traffic to Fiserv.

E) Staff Shortage

If due to illness, there is a high percentage of absenteeism at a branch location; management can decide to take one of four actions. They can either borrow personnel from a sister branch, limit the banking hours at a particular branch if applicable close the interior of the branch and keep the drive-up and walk-up open, or they can close the branch and inform their customers to travel to the closest branch location. Break-opens of safe deposit boxes will be postponed until the adequate staff is available.

F) Storm Emergency

In case of Storm Emergency there is a list and memo is saved on our internal system.

If senior management decides to put the list in to affect the storm emergency phone line will be updated . They also make sure that each staff  member has the help line telephone number. It is duty of branch manager  that the employees who are assigned to your branch have the access they need (keys, alarm codes, combinations, etc.) and that you have the staff in place to open your branch.

Role of Employees and Branch Management in Disaster Recovery

EssentialEmployees

For a branch to function, there is a need of at least three individuals, with one person being a member of the management team, one requiring to be current on new account procedures and one being current on teller procedures. A branch can function without a guard. If a branch has safe deposit, then one of the three needs to be current on safe deposit procedures.

Control Teller Duties 

All branches have their Customer Service Supervisor and other designated employees cross-trained to perform these duties.

Cross Training of Employees

Cross Training is currently being performed at all branch locations. Tellers are being trained to perform CSR work and vice versa The Branch Manager tracks the cross-training of individuals at their location. Cross training of employees will continue to be prepared for an unforeseen event.

Threats and Risk:

In this section, we will look at some threats and risk in case a failure of the branch redemption plan. Following are the risk can that can occur.

1)     Violations

First of all, it is a violation of federal and state laws by not having an Emergency Action Plan. There is a risk that states auditors might fine an organization by not having the redemption plan.

      2).  Reputation

Reputation matters a lot in the service industry, like banking, where customers are more demanding. In case of an emergency if customers are requesting large withdrawals and the branch is out of cash, or they want to send an essential wire for the, but branch doesn’t have an internet connection then it will arise question on bank’s reputation. Reputation takes years to build, but it can be destroyed in minutes.

      3). Financial risk

Financial loss is one of the results by not having a business continuity plan.  According to research, the cost of a business interruption varies from $8 million due to natural disasters.  The longer the downtime is, the higher the losses. Having a business continuity plan that covers all bases can help reduce downtime and failures.

Critical and Non-Critical Functions

In this section, we will discuss the functions which are critical and non-critical for branch operations. First of all, we will discuss the Critical functions

Critical Functions

1) Teller Functions

The teller receives and processes transactions of a monetary nature for the bank’s customers. This service is critical to the bank and must be restored as quickly as possible in the event of an interruption.

The teller functions identified as critical by the bank are:

a) deposits b) withdrawals c) cashing checks (including on-us, teller checks, money orders, dividend remittance checks, and pension distribution checks) d) issuing teller checks e) accepting loan payments) control and disbursement of cash g) close accounts.

2) Customer Service Functions

CSR’s provide a variety of banking services for depositors and prospective customers as related to their particular needs and cross-sell the bank’s products. These functions are critical to the bank, and even though adverse operating conditions may exist, it must be portrayed to customers and potential customers as “business as usual,” since a first impression is a lasting one.

The customer service functions identified as critical by the bank are:

a) opening Savings and CD accounts b) opening Checking accounts c) opening IRA and Pension accounts d the) renewal of CD accounts e) offer consumer loans f) wire transfers g) placing and removing stop payments (DDA accounts).

Non-Critical Functions

1) Teller Functions – The teller functions identified as non-critical by the bank are: a) safe deposit rental payments b) bond redemption c) MetroCard sales d) US Postage Stamp sales

2) Customer Service Functions 

The customer service functions identified as non-critical by the bank are: a) instant issue of Bank Cards b) sale of American Express Travelers Checks AMEX remittance d) Gift Cards e) processing check orders Short TermExtended Term – If check orders cannot be processed online through the PC, the branch should place the order by telephone or by mail. .

3) ATM Functions

 The ATM is not affected by the loss of the file server. It is only affected by a loss of telecommunications or a hardware breakdown. ATM’s are not critical to the operation of a branch but are essential to the operation of the bank through a network.

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4) Online Banking – Internet Banking is provided by a third-party that has its own Business Resumption Plan Program. In the event of a disaster, the customer can visit one of their nearest locations to conduct their business until the system becomes available.

Recommendations on the business continuity planning

 

In this section I will recommend on how to continue the business effectively. One of most important things in Retail Banking is customer service.

Customer Service

The goal is to accommodate our customers as best we can and keep them happy. There are certain limitations when operating offline. However, branch management should be consulted before saying “no” to a customer request.

*DO NOT TURN CUSTOMERS AWAY* If you are not able to process work Offline, customers should still be accommodated as best we can. The same limitations stated on page 1 will apply to this situation. Customers making deposits and payments should be issued receipts. Customers making withdrawals or cashing checks are limited to the previously stated amounts unless an exception is made by branch management. For withdrawals and refund deposits, passbooks should be held at the branch until the transaction can be entered in the book. *Every resource should be used to try to accommodate a customer request, including verifying balances through contacting Online branches, ATM Inquiries, Telephone Banking Inquiries, Online/Mobile Banking Inquiries.

Forms

Forms are not available in offline mode, so it is recommended to keep a hard copy of all forms in the branch.

Accessing Offline Mode

There should be a testing of offline mode on a regular basis. Only users that have signed into banking software at least once from the workstation in the online mode will have the configuration files required to use the offline module. When the connection to the database is lost, a message is displayed, and the employee has the option to sign on in offline mode.

Managerial abilities:

In that section I will address managerial abilities that I will be developing during the completion of the SMAC. The first managerial ability that I will be discussing and important for my future career is of planning.

Planning:

                Planning is one of the most critical managerial ability that every manager must be good to compete in the global world. During the completion of SMAC, it will improve my planning skills by working at the same time on both individual and team assignments. During this SAMC, I will research on different aspects of disaster recovery plan and procedure, so extensive research on that issue will help in the development of my analytical planning skills. As this is a short semester, and there is a lot of work that needs to be done on time, so proper planning will help me to complete my SAMC successfully. Finally, I will also learn how to prioritize my assignment work and discussions that result in the enrichment of my planning skills.

Attention to detail:

                               The second managerial ability which I need to develop as a part of this SMAC is attention to detail. It is crucial because it helps in preventing mistakes and makes the work easier. During this SAMC, I will be working on the disaster recovery issues in the banking sector in a systematic way that will help in the development and enrichment of my attention to detail skill. I will also be working on my grammatical errors during the assignment’s submissions, that will result in the improvement of my accuracy and attention to detail managerial ability.

Finally, the development of these managerial abilities will help me in moving and growing up in my career.

 

Conclusion

In the banking sector, customer service is of prime importance because banks need customers to survive in a competitive business environment. Customer loyalty can be gained if they get their services on time. During the completion of SMAC, we have addressed some issues that can disrupt banking services and how to recover from the disaster. Currently, I am working with Ridgewood Savings Bank, and for the SMAC, I researched our branch redemption plan if a disaster happens. It is essential to address that issue because banking is all about trust, and banks can build trust by providing uninterrupted customer service.

    During the completion of this SAMC, I used different resources to address those issues, and towards concluding, I think the banking industry should use the modern technologies and resources to overcome if a disaster happens.   

 

Reference:

Introduction

Disaster is any unexpected event that can significantly put any organization at risk by interfering with operations. Disaster recovery is the process of continuing  normal work of operations following a disaster by recapturing access to data, hardware, software and networking equipment. However, if the working location is damaged , then activities may also broaden to other options  like finding different work locations, reestablishing  communications for  an       employees.Disaster recovery response should follow a disaster recovery plan where a set of procedures developed specifically to prepare the organization to recover in the shortest possible time during a period of acute stress.

I am currently working with Ridgewood Saving Bank as a Savings Counselor. I understand the significance of disaster recovery in the banking sector. Disaster recovery planning devises plans for the restoration of computing and communications services after a power loss, and natural disaster have disrupted them. So, during the SMAC, I will be highlighting that issues because disruption of service effects the customers a lot in our industry and then finally comes up with a plan that how to deal with disaster as per banking rules and regulations.

 

Branch Operation

Branch Operation Department is of significance in the banking sector. Banking operations officers are responsible for all day to day operational activities at banks. These banking officers  overlook different  bank departments , and they ensure all financial  transactions are running smoothly. Branch operation managers also concentrate on improving the bank& customer service record and intervening when problems arise.

The Branch Operations Department, which consists of the retail banking branch network, is responsible for providing banking services to customers efficiently and reliably consistent with government regulations and bank policy and procedures. This plan addresses will address the important issues of disaster recovery in banking sector.

Level of Service in Branch Operations

First of all we will look at level of services that is affected in case of disaster recovery and the plan to resolve that issue.Below is the description of a financial institituion’s branch operation disaster recovery plan. Levels of Service Delivery to the bank’s customers can be affected in different ways by the following scenarios:

A) Loss of Facility

B) Failure of System

C) Loss of File Server

D) Loss of WAN

E) Staff Shortage

F) Loss of System

I)       Loss of Facility

II)    If a disaster occurs at one or more of  the branches and it becomes inopenable, customers will be advised to go to the nearest branch location to perform their banking.

III) If the branch is closed for any type of emergency situation a letter must be sent to the New York State Department of Financial Services explaining the circumstance as to why the branch was closed.

IV) In the event that a branch will be rendered inoperable, arrangements could be made, to have the Mobile Branch available for customer transactions 2-3 days each week*. Additionally, if a major disaster occurs at one or more of our branches and it appears to be for an extended period of time, the branch and its staff could set-up a temporary facility in the general area, determined by Senior Management, to assist the Bank’s customers with questions and direct them to the nearest open branch location.

V)    *Mobile Branch scheduled locations would need to be changed and notification made to the New York State Department of Financial Services.

B)  Failure of System
In Ridgewood Savings our main software that handles all banking operation is DNA that is operated by FISERV,that  has an in house recovery center located in Lewisville, Texas. FISERV indicates that this Lewisville location is a mirror image of the Cherry Hill data center allowing recovery time in 24 hours. Refer to Teller Procedures in Offline Mode contained within this plan for detail on how to operate when the core banking application is not available in regular production mode.

B) Loss of System

 There is back up of the software that is used to run the banking system efficiently. There is a Teller Procedures in Offline Mode on how to operate when the core banking application is not available in regular production mode.

C) Loss of File Server

The failure of the file server has a significant impact on the delivery of banking services to our customers. In the event of such damage, the Information Systems Department would make every effort to bring the affected server back online. The Information Systems Department would attempt to resolve the problem via telephone or respond to the location if necessary. The IS department would be responsible for determining if the server can be repaired by contacting HP for service. If it is determined that the server cannot be repaired, IS personnel will replace the affected hardware with spare/recovery equipment as available.

D) Loss of Data Circuits (WAN)

If online communication to the host is lost as a result of telephone data line problems, the branches are equipped with VPN backup lines. Upon a circuit failure, network equipment will automatically switch communication to VPN into one of the HUB locations, and then pass traffic to Fiserv.

E) Staff Shortage

If due to illness, there is a high percentage of absenteeism at a branch location; management can decide to take one of four actions. They can either borrow personnel from a sister branch, limit the banking hours at a particular branch if applicable close the interior of the branch and keep the drive-up and walk-up open, or they can close the branch and inform their customers to travel to the closest branch location. Break-opens of safe deposit boxes will be postponed until the adequate staff is available.

F) Storm Emergency

In case of Storm Emergency there is a list and memo is saved on our internal system.

If senior management decides to put the list in to affect the storm emergency phone line will be updated . They also make sure that each staff  member has the help line telephone number. It is duty of branch manager  that the employees who are assigned to your branch have the access they need (keys, alarm codes, combinations, etc.) and that you have the staff in place to open your branch.

Role of Employees and Branch Management in Disaster Recovery

EssentialEmployees

For a branch to function, there is a need of at least three individuals, with one person being a member of the management team, one requiring to be current on new account procedures and one being current on teller procedures. A branch can function without a guard. If a branch has safe deposit, then one of the three needs to be current on safe deposit procedures.

Control Teller Duties 

All branches have their Customer Service Supervisor and other designated employees cross-trained to perform these duties.

Cross Training of Employees

Cross Training is currently being performed at all branch locations. Tellers are being trained to perform CSR work and vice versa The Branch Manager tracks the cross-training of individuals at their location. Cross training of employees will continue to be prepared for an unforeseen event.

Threats and Risk:

In this section, we will look at some threats and risk in case a failure of the branch redemption plan. Following are the risk can that can occur.

1)     Violations

First of all, it is a violation of federal and state laws by not having an Emergency Action Plan. There is a risk that states auditors might fine an organization by not having the redemption plan.

      2).  Reputation

Reputation matters a lot in the service industry, like banking, where customers are more demanding. In case of an emergency if customers are requesting large withdrawals and the branch is out of cash, or they want to send an essential wire for the, but branch doesn’t have an internet connection then it will arise question on bank’s reputation. Reputation takes years to build, but it can be destroyed in minutes.

      3). Financial risk

Financial loss is one of the results by not having a business continuity plan.  According to research, the cost of a business interruption varies from $8 million due to natural disasters.  The longer the downtime is, the higher the losses. Having a business continuity plan that covers all bases can help reduce downtime and failures.

Critical and Non-Critical Functions

In this section, we will discuss the functions which are critical and non-critical for branch operations. First of all, we will discuss the Critical functions

Critical Functions

1) Teller Functions

The teller receives and processes transactions of a monetary nature for the bank’s customers. This service is critical to the bank and must be restored as quickly as possible in the event of an interruption.

The teller functions identified as critical by the bank are:

a) deposits b) withdrawals c) cashing checks (including on-us, teller checks, money orders, dividend remittance checks, and pension distribution checks) d) issuing teller checks e) accepting loan payments) control and disbursement of cash g) close accounts.

2) Customer Service Functions

CSR’s provide a variety of banking services for depositors and prospective customers as related to their particular needs and cross-sell the bank’s products. These functions are critical to the bank, and even though adverse operating conditions may exist, it must be portrayed to customers and potential customers as “business as usual,” since a first impression is a lasting one.

The customer service functions identified as critical by the bank are:

a) opening Savings and CD accounts b) opening Checking accounts c) opening IRA and Pension accounts d the) renewal of CD accounts e) offer consumer loans f) wire transfers g) placing and removing stop payments (DDA accounts).

Non-Critical Functions

1) Teller Functions – The teller functions identified as non-critical by the bank are: a) safe deposit rental payments b) bond redemption c) MetroCard sales d) US Postage Stamp sales

2) Customer Service Functions 

The customer service functions identified as non-critical by the bank are: a) instant issue of Bank Cards b) sale of American Express Travelers Checks AMEX remittance d) Gift Cards e) processing check orders Short TermExtended Term – If check orders cannot be processed online through the PC, the branch should place the order by telephone or by mail. .

3) ATM Functions

 The ATM is not affected by the loss of the file server. It is only affected by a loss of telecommunications or a hardware breakdown. ATM’s are not critical to the operation of a branch but are essential to the operation of the bank through a network.

4) Online Banking – Internet Banking is provided by a third-party that has its own Business Resumption Plan Program. In the event of a disaster, the customer can visit one of their nearest locations to conduct their business until the system becomes available.

Recommendations on the business continuity planning

 

In this section I will recommend on how to continue the business effectively. One of most important things in Retail Banking is customer service.

Customer Service

The goal is to accommodate our customers as best we can and keep them happy. There are certain limitations when operating offline. However, branch management should be consulted before saying “no” to a customer request.

*DO NOT TURN CUSTOMERS AWAY* If you are not able to process work Offline, customers should still be accommodated as best we can. The same limitations stated on page 1 will apply to this situation. Customers making deposits and payments should be issued receipts. Customers making withdrawals or cashing checks are limited to the previously stated amounts unless an exception is made by branch management. For withdrawals and refund deposits, passbooks should be held at the branch until the transaction can be entered in the book. *Every resource should be used to try to accommodate a customer request, including verifying balances through contacting Online branches, ATM Inquiries, Telephone Banking Inquiries, Online/Mobile Banking Inquiries.

Forms

Forms are not available in offline mode, so it is recommended to keep a hard copy of all forms in the branch.

Accessing Offline Mode

There should be a testing of offline mode on a regular basis. Only users that have signed into banking software at least once from the workstation in the online mode will have the configuration files required to use the offline module. When the connection to the database is lost, a message is displayed, and the employee has the option to sign on in offline mode.

Managerial abilities:

In that section I will address managerial abilities that I will be developing during the completion of the SMAC. The first managerial ability that I will be discussing and important for my future career is of planning.

Planning:

                Planning is one of the most critical managerial ability that every manager must be good to compete in the global world. During the completion of SMAC, it will improve my planning skills by working at the same time on both individual and team assignments. During this SAMC, I will research on different aspects of disaster recovery plan and procedure, so extensive research on that issue will help in the development of my analytical planning skills. As this is a short semester, and there is a lot of work that needs to be done on time, so proper planning will help me to complete my SAMC successfully. Finally, I will also learn how to prioritize my assignment work and discussions that result in the enrichment of my planning skills.

Attention to detail:

                               The second managerial ability which I need to develop as a part of this SMAC is attention to detail. It is crucial because it helps in preventing mistakes and makes the work easier. During this SAMC, I will be working on the disaster recovery issues in the banking sector in a systematic way that will help in the development and enrichment of my attention to detail skill. I will also be working on my grammatical errors during the assignment’s submissions, that will result in the improvement of my accuracy and attention to detail managerial ability.

Finally, the development of these managerial abilities will help me in moving and growing up in my career.

 

Conclusion

In the banking sector, customer service is of prime importance because banks need customers to survive in a competitive business environment. Customer loyalty can be gained if they get their services on time. During the completion of SMAC, we have addressed some issues that can disrupt banking services and how to recover from the disaster. Currently, I am working with Ridgewood Savings Bank, and for the SMAC, I researched our branch redemption plan if a disaster happens. It is essential to address that issue because banking is all about trust, and banks can build trust by providing uninterrupted customer service.

    During the completion of this SAMC, I used different resources to address those issues, and towards concluding, I think the banking industry should use the modern technologies and resources to overcome if a disaster happens.   

 

Reference:

  • Gerard, T., & Hiott, W. L. (1990). Evaluating a disaster recovery plan; disaster recovery planning for credit unions: Sorting out the bells from the whistles; hurricane hugo: What one bank learned. Banking Software Review, 15(5), 12. Retrieved from
  • https://ez.sjcny.edu/login?url=https://ez.sjcny.edu:2099/docview/227748366?accountid=28722
  • Information system in Ridgewood Savings Bank. (n.d.).
  • Kiljan, S., & Vranken, H. (n.d.). Disaster Recovery in Banking. Disaster Recovery in Banking. Retrieved from EBSCO database. (Accession No. 18320990)
  • Veritas software corporation: Disaster recovery plans are failing to keep pace with IT change according to VERITAS survey; virus attacks, changes in technology and an increase in patches leave many disaster recovery plans out of date. (2004, Oct 13). M2 Presswire Retrieved from https://ez.sjcny.edu/login?url=https://ez.sjcny.edu:2099/docview/443711921?accountid=28722
  • Whaling, C. L. (n.d.). Technological changes in banking sector. Retrieved from https://www.sciencedirect.com/science/article/pii/S0160791X96000279
  • Wisniewski, M. (1993). Management Information system. Retrieved from ACCA database
  • https://www.agilityrecovery.com/major-risks-of-not-having-a-business-continuity-plan/

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