Case Study #3: Deutsche Bank

Operational Research - Wed 10:30am - 1:30pm

Prepared by:
Patapat, Jennelyn
Sarmiento, Roy John

Submitted to:
Dicayanan, Roy
Problem:
- The Deutsche Bank is having difficulty controlling its finances and its
customers due to its old information system.
- Deutsche Bank is in trouble with U.S. authorities over its failure to
comply with the swap reporting provisions of the Commodity Exchange Act and the
CFTC Regulations.
- Weak information systems may also have contributed to the financial
crisis. Banks also had difficulty unraveling the complicated financial products they
had purchased and sold to assess their underlying value.
- Deutsche bank failed to improve its own information systems , making
the bank not run efficiently as if it had the correct technology. There is not a single
person to blame for this issue, but over time, with CEOs in the past, another board of
directors placed their old technology on the back burner. Since the technology was
out of date, a lot of things had to be done manually.
-
Factors contributing to this problem:
- Outdated systems;​ Banks are under pressure to comply with their
aging computer systems, but the IT infrastructure of many conventional financial
institutions is struggling to meet these regulatory demands as well as increasing
customer preferences.
- Incompatibility; ​Banks have left several old structures in place to
manage the workload for each of their companies. This has created what experts call
"spaghetti balls" of overlapping and sometimes incompatible technology systems and
software programs.
- High Costs; ​In addition to incurring high costs associated with
dealing with regulators and paying fines, Deutsche Bank was a very cumbersome and
expensive bank to operate.
Role of Information Technology at Deutsche bank
The role of information technology at Deutsche Bank was to handle financial
derivatives, swap data reporting, and store legal entity identities, f​acilitates
sophisticated product creation, enhanced business infrastructure, efficient risk
management strategies and allows financial intermediaries to enter geographically
distant and diversified markets. The Internet has had a huge effect on the distribution
networks of the banks. IT was related to the bank’s operational efficiency,
decision-making capability, and business strategy by making sure the bank is up to
date on the greatest banking innovations to keep employees and clients happy.

How was IT related to the bank’s operational efficiency, decision-making

capability, and business strategy?

Information Technology is practically the director of Deutsche Bank.

Since technology is used widely in the bank, IT is involved. IT is used to facilitate
mergers, key processes, any monitoring and reporting, as well as any shared
knowledge. Since processes and technologies have not been up to date, there have
been major issues. Changes have been made to fix the problems Deutsche Bank has
been facing. Without technological upgrades, the bank would not operate effectively,
it would not be easy to make a decision if the right resources were not available to
make a good decision.

Was Deutsche Bank using technology effectively to pursue its business

strategy?

As for now, they 're trying their best to deal with any issues created by the old
system, CEO John has made a very positive move by updating and finding further
options by working with HP, HP can provide cloud infrastructure, hosting and
storage for their system, this is a huge business plan for them, I think they need to
stay up to date and look for a more effective way to make their big business simpler.
What solution for Deutsche Bank was proposed? How effective do you
think it will be?
The idea suggested was to upgrade and modernize the information systems
that Deutsche Bank had in place. The re-engineering of the information systems was
sent overseas to identify the flaws that could be corrected. HP has jumped on board
to assist with updates and new products. I assume that these reforms will be
successful as long as they are properly enforced. Employees would require
preparation and management needs to track progress. As long as the right changes
are made and everyone knows the reasons for the changes and the new processes,
they should be very successful in educating their staff and customers of how their
system operates to prevent problems.

SWOT Analysis for Deutsche Bank

Strengths of Deutsche Bank AG – Internal Strategic Factors
- High level of customer satisfaction – the company, with its dedicated customer
relationship management department, has been able to achieve a high level of
customer satisfaction among current customers and good brand equity among
potential customers.
- Successful track record of integration of complementary firms through
mergers and acquisitions. Over the last few years, it has successfully integrated
a number of technology companies to streamline its operations and build a
reliable supply chain. Superb results in emerging markets – Deutsche Bank AG
has developed expertise in entering and making new markets a success. The
expansion has allowed the company to develop new revenue sources and
diversify the risk of the economic cycle in the markets in which it operates.
- Good Free Cash Flow – Deutsche Bank AG has large free cash flows that
provide the business with money to grow into new ventures.
- Highly trained workers through successful training and learning programmes.
Deutsche Bank AG is investing considerable resources in the training and
growth of its workers , resulting in a workforce that is not only highly qualified
but also driven to achieve more.
Weakness of Deutsche Bank AG – Internal Strategic Factors
- Financial preparation is not carried out correctly and effectively. Current asset
ratios and liquid asset ratios indicate that the business can make more
effective use of cash than it does at present.
- There are gaps in the product range sold by the company. This lack of choice
will give a new competitor a foothold on the market.
- Not very good at the forecasting of product demand, resulting in a higher rate
of missed opportunities relative to its rivals. One of the reasons why the
inventory days are high relative to its rivals is that Deutsche Bank AG is not
very good at predicting demand and therefore ends up holding a higher
inventory both in-house and on-the-air.
- Not very good in merging businesses with a diverse work culture. As stated
earlier, even though Deutsche Bank AG is effective in merging small
businesses, it has a share of the failure to integrate firms with a different work
culture.
- Organizational structure is only consistent with the existing business model,
thereby limiting the growth of neighboring product segments.
- Restricted success outside the core market – While Deutsche Bank AG is one
of the leading organizations in its industry, it has faced challenges in
expanding to other product segments with its current culture.
- Investment in research and development is below the fastest-growing players
in the sector. While Deutsche Bank AG spends more than the industry average
on research and development, it has not been able to compete with leading
players in the industry in terms of innovation. It has come across as a seasoned
business looking forward to delivering products focused on proven
functionality to the market.
Opportunities for Deutsche Bank AG – External Strategic Factors
- Opening up new markets as a result of a government agreement – the
introduction of a digital technology standard and a global free trade agreement
presented Deutsche Bank AG with an opportunity to join a digital emerging
market.
- The new tax policy will have a huge effect on the way of doing business and can
open up new opportunities for existing players such as Deutsche Bank AG to
improve their profitability.
- Government green drive also opens up possibilities for procurement by both
state and federal government contractors of Deutsche Bank AG 's goods.
- A new opportunity for Deutsche Bank AG will open up new patterns in
consumer behavior. It offers an excellent opportunity for the company to
develop new revenue sources and also to diversify into new product categories.
- Decreasing freight costs due to lower shipping rates will also reduce the cost of
Deutsche Bank AG 's goods, thereby providing the company with an
opportunity-either to improve its profitability or to offer consumers incentives
in order to gain market share.
- New online channel customers – Over the last few years , the company has
invested vast amounts of money on the online platform. This investment has
opened up a new distribution platform for Deutsche Bank AG. Over the next
few years, the company will be able to take advantage of this opportunity by
better understanding its customers and meeting their needs through big data
analytics.
- The new technology offers Deutsche Bank AG an opportunity to implement
competitive pricing strategies in the emerging market. It will allow the
company to retain its loyal customers with a high level of service and to attract
new customers through other value-oriented proposals.
Threats Deutsche Bank AG Facing - External Strategic Factors
- Rising pay levels, particularly movements such as $15 an hour and rising
prices in China, may lead to serious pressure on the profitability of Deutsche
Bank AG.
- The company can face litigation in different markets-different laws and
constant variations in quality standards in those markets.
- Changing customer purchasing behavior from the online channel may pose a
challenge to the current supply chain model of physical infrastructure.
- New technologies introduced by a competitor or a market disruptor may pose a
serious threat to the industry in the medium to long term.
- Increasing raw materials can pose a risk to the profitability of Deutsche Bank
AG.
- New environmental regulations under the Paris Agreement (2016) may pose a
challenge to some established categories of goods.
- The growing trend towards isolationism in the American economy may lead to
similar reactions from other governments, negatively impacting foreign sales.
- Intense competition – Stable profitability has increased the number of players
in the industry over the last two years, placing downward pressure not only on
profitability but also on overall revenue.