Answers to Questions Regarding Banking and Security Issues

1774 Words Jun 16th, 2018 8 Pages
Question 1
With an eye to cut the costs and to focus on the basic services banks are repeatedly outsourcing their final financial service work to the third parties, which are at times located outside of the country, to execute operations on a regular basis that would usually be carried out by the bank itself.
Any financial institution outsourcing its activities does bear certain risks, which must be alleviated by a regulatory body such as the central bank. The central bank is the uppermost monetary institution, which has been specially given an official authority to perform control across the banking system of the country.
Regulating bodies can mitigate those risks by taking steps to:
• Create broad and perspicuous outsourcing
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The requirement can be consumer law, bank’s own regulations set, cyber law, etc.
Operational Risk
Operational risk comes from technology breakdown, error, fraud, poor financial capability to meet obligations and provide solutions and remedies. Fuji Xerox went through the experience of cyber crime. Its server was hacked meaning there was a breakdown in its information system. If the security system was programmed strong enough to withstand the hackers the operational risk would be much less. (Outsourcing in Financial Services, February 2005)

Question 3
Banks need to put in place an appropriate configuration, policies and procedures to assess, confirm, reevaluate, regulate and monitor the threats of all their outsourcing activities prior to selection the service provider. They are required to put due diligence into execution to examine the third party’s capability of functioning adequately, trustworthiness, track record and financial status.
Before involvement in outsourcing requiring cloud computing all the institutions are supposed to carry out risk assessments and due diligence. Cloud computing is the method of storing frequently used computer data on several servers which can be entered through the Internet.
Furthermore, it must be mentioned that the contract between the bank and third party must comprehend provisions and precautions. The bank should be
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