AMITY BUSINESS SCHOOL, MUMBAI

DHANISHA N LOLAM
ENROLMENT NO. – A70050220006
MBA (B&F)
BATCH 2020 – 2022
ASSIGNMENT - 2
BANKING OPERATIONS
FACULTY – GANESH SIR
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BO ASSIGNMENT – 2
Q.) Banking services have improved with the use of technology, but the risks associated
have also increased. Discuss.
Solution:
Banking sector in the past decade has majorly shifted and accepted the digital transformation.
In the past, basic transaction of lending and borrowing money was such a tedious task, it
wasn’t possible without visiting the bank and standing hours and hours in line to get a simple
task such as depositing of money done and on top of that it would take days for the
transaction to get completed. Looking at everything today, technology definitely has changed
the face of banking sector. Any individual/consumer can avail the banking services provided
to them by just a touch be it online transaction of money or to check your transaction history,
it is just at the palm of your hand.
I. Risks involved in using various technology in banking services
1. Operational Risk: The most common risk of all time.
 It involves technological errors, risk of confidentiality disclosure or of
data and privacy.
 Access that can be unauthorized.
 Transactions being incorrect or fraudulent.
 Agreements being Non-Enforceable.
 Various internal factors like negligence from the employee, hackers, etc.
2. Security Risk: All of the bank related transactions are important and of
utmost importance. With hackers getting advance at what they’re doing it gets
even more of a risk for the bankers to increase the security, since all the
information is all, there is a greater risk of customers information being
hacked and misused for illegal transactions.
3. System Architecture and Design: It is important for all the banks to keep
their banking system always updated. An outdated system will only cause for
the bank to land in some or the other crisis. It can be investment loss or
missing of entries. Here, the banks have to always choose a good wiring
system in order to omit the operational and security risk factors because both
of these factors are dependent for having adequate controlling process.
 4. Reputational Risk: Reputation plays a major and critical role in every field,
let alone be the banking sector. If consumers are depositing their money in the
banks in return for services and safety provided by the bank, it is an
impeccable service that has to be provided by the bank. Reputational risk can
be security break or providing misinformation to consumers, communicational
error from accessing an account or failed in delivering the required services to
the consumers and majorly consumers not able to avail the services when
required, all this can lead to reputational risk.
5. Legal Risk: E-banking is entirely a new and evolving technology. Even
though it is easily accessible at the palm or click of our hand, there are some
legal norms that need to be followed by every bank. Malpractices or any other
practices can lead to the violation of laws which can lead to legal risks
involved in it.
6. Money Laundering Risk: though e-banking has it perks its also has its limits.
In E-banking just because all the transactions are done digitally it is basically a
remote transaction. A person can make a bank account not associated to his
original name and carry out monetary transactions illegally. Due to this, it can
be hard for the bank to track and detect these criminal activities. Even though
there are many rules made for this but still there are such malpractices taking
place in some way or the other.
7. Cross-Border Risk: the main objection of e-banking is definitely to have a
global reach; therefore, it increases the risk of cross-border risk that is beyond
national borders. Some of the risks are given below:
 Legal and Regulatory Risk: as the jurisdiction in each country and
nation is different, the rules and regulations applied to differ increasing
in the uncertainty in the legal requirements.
 Operational Risk: It is difficult to monitor the various services
provided by the bank in other countries due to this the probability of
operational risk increases.
 Credit Risk: Cross-border transactions increase credit risk. This is
because it is difficult to evaluate loan applications from customers
from different countries/regions.
8. Strategic Risk: In this, basically the strategy of working out various banking
services if focused on like a proper business plan for the development of the
bank, to have support for developing the bank sufficient resources should be
available, proper training and availability of resources to the employee or the
work environment, etc. all these factors play a role in strategic risk.
9. Other Risks: Online frauds like calling up consumers to retrieve their data
and through that illegally, without the consent of the consumer transferring of
funds. Hacking the ATM machine and withdrawing money from it. There are
other risks as well like market risk, interest rate risk etc.

II. Solution for these problems

1. Banks need to keep their system up-to-date and provide regular training to
their staffs with the new and emerging technology. This will help avoid any
loopholes in the system.
2. Banks should have a strategic approach. They should build and adopt security
measures to decrease and maintain the secrecy and confidentiality data of the
 consumer. Implement best security controls to have a logical network and
access over the system.
3. Anti- Money Laundering (ALM) technology should be adapted by banks to
omit or decrease the risk of money laundering by having a proactive approach
to the situation by reporting it.
4. The bank must have a core criticism handling system to implement a fraud-
free banking culture by testing of security controls and giving quick responses
to new threats.
5. All banks must have clear sanctuary plans and credentials. In addition, banks
must firmly ensure bodily access control. They should also have review of
market place development regularly and also know the vulnerabilities.
6. For the benefit of rural and remote areas of the nation, banks must consider to
upgrade and adopt various extensive banking network. While also providing
sufficient information to the staff of the bank for security expertise.
7. For security management banks should use active system based for this
purpose and also high monitoring tools to have a security control over
business information.
8. Monitoring of activities such as system testing and surveillance and auditing
can be done to avoid risks. Monitoring of system would prevent attacks or
disruption while of auditing would prevent deficiencies and reduce the risk of
e-banking,
9. Evaluating of products and services before introducing it to the market can
reduce the risk of operational as well as reputational risk because it tests and
validates the if the system is functioning properly so that the desired results
are declared.
10. Proper disclosure of services and products offered can reduce the legal and
reputational risk. Addressing of new products and educating the consumers
with proper information can reduce the risk on linked sites.