Commonwealth Bank Loses Data: Implications and Challenges

This paper analyses the data loss of Commonwealth Bank of Australia (CBA) and its implications on the bank's financial performance, customer satisfaction, and brand value. The paper also discusses the challenges faced by CBA as an international business company (IB) due to the data loss.

Running head: COMMONWEALTH BANK LOSES DATA
COMMONWEALTH BANK LOSES DATA
Name of the student:
Name of the university:
Author note:

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Executive summary:
The aim of the paper is to show how irresponsible business conducts by key
institutions like banks have serious effect on the customers. It can be pointed out that
CBA has represented high degree of slack management of confidential data not
befitting its international standards. The bank should take steps to rectify these mistakes
and not repeat them in the future.

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Table of Contents
1.0. Introduction.................................................................................................................2
2.0. Company background:...............................................................................................2
2.1. Product/Services:........................................................................................................2
2.2. Location:.....................................................................................................................3
3.0. Analysis of reported issue:.........................................................................................3
4.0. Discuss issue using relevant IB framework-international marketing issues:.............6
Loss of customer satisfaction and loyalty:.....................................................................6
Weakening of brand name:............................................................................................7
Weakening financial performance (other issue):...........................................................8
5.0. Critique:.......................................................................................................................8
5.1. Implications and challenges on CBA (IB company):..................................................9
Implication 1: Legal actions:...........................................................................................9
Implication 2: Losing investors:......................................................................................9
Challenge 1: Financial sustainability:..........................................................................10
Challenge 2: Competitive advantage challenge:.........................................................11
7.0. Recommendations:...................................................................................................11
Recommendation 1:.........................................................................................................11
Recommendation 2:.........................................................................................................11
Conclusion:......................................................................................................................11

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References:......................................................................................................................13
1.0. Introduction
International commercial banks like Commonwealth Bank of Australia serve
millions of business customers as well individual customers around the world. These
banks provide gateways for financial transactions worth millions of dollars. The
customers in order to conduct financial transactions with CBA input personal data like
personal identification numbers. Commercial banks maintain vast databases in which
they maintain, acquire, manage and utilize the customers’ data for business purposes. It
is evident that any breach in the database can cause loss of data and effect the
customers. The aim of the assignment is to analyse the data loss in which CBA lost
data of 20 million customers.
2.0. Company background:
2.1. Product/Services:
Commonwealth Bank of Australia is a multinational bank based in Australia and
listed on the ASX. The products of the CBA consists of asset and liability products. The
liability products of the bank consists savings account and current account. The asset
products of CBA consists of loans and credit cards. The bank offers loan for buying
homes and business loans. The market of CBA can be segmented into commercial and
domestic customers. The savings bank accounts is meant for domestic clients while the
current account is meant for commercial clients. The products like debit cards and credit
cards are designed to meet the needs of both business and domestic clients. The bank

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provides opportunities to invest in assets like shares and bonds to both its business and
domestic customers. CBA provides gateways to commercial establishments like retail
outlets. The bank offers highly specialised products like multicurrency exchange
facilities and travel insurance. The bank offers services to customers at brick and mortar
outlets as well as on the digital portals. The customers at access banking services in the
forms of net banking and mobile banking which enables customers to bank round the
clock. The staff of the bank also provide financial advices to the customers and enable
the latter to plan investments.
2.2. Location:
Commonwealth Bank of Australia is based in Sydney, Australia and has more
than a hundred branches in Australia. The bank has a more than 4300 ATMs. The
international locations of CBA consist of New Zealand, London, China and India. As far
as place is concerned, the bank operates both through physical branches as well as
digital platform, the latter being a significant part of its product line. The bank also sell its
asset products through broker firms which act as agents of the former. They strong
network of brokers has enabled the bank to expand its presence into areas where CBA
has no direct operations.
3.0. Analysis of reported issue:
The reported issue pertaining to CBA which caused concern was the news that
the reputed bank had lost data of around 20 million customers including financial
statements of more than 15 years. The incidence caused immense concern among the
customers of the bank after surfacing. The acting group executive of retail banking

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services of CBA Angus Sullivan however pacified the customers in his public statement
saying that the data lost did not contain any extra confidential data like passwords.
An analysis of the data loss points out to severe issues on regarding the quality
of the services of the bank and its commitment to customer services. There are several
factors which might have caused the loss of data of as many as 20 million customers.
The first factor which might have caused the data loss could be the
incapability of the bank to protect its expending customer database. As Paul,
Mittal and Srivastav (2016) mention that customer services in banks depend on their
capacity to predict the future needs of the customers. The data base of customers
which the bank captures in its database plays significant role in helping the bank
officials identifying these needs of the customers and form appropriate product
strategies. Hassan et al. (2015) point out that this capacity of the bank to offer
appropriate products have direct relationship with customer satisfaction. This clearly
shows the important position customer data holds in the database. Thus, the losing of
confidential data actually points out to failure of the bank to strengthen its
database security to meet the needs of the expanding customer base.
The second factor which can be held responsible for the loss of data is
slack knowledge management system and corporate governance. The commercial
bank in its official website claims itself to be embodiment of customer service and
seamless banking experience (Commbank.com.au. 2018). However, the data loss
actually contradicted this very statement of the bank. The loss of data clearly unearthed
the slack knowledge management system and lack of corporate government.
Ramachandran and Chang (2016) point out in this respect that the branch managers in

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order to achieve sales targets, often allow the staff to transfer confidential data like
customer information to different devices like personal smart phones and even retain
them in hard copies. This weak management of data increases scope of loss of data
and even transferring them to unauthorised identities without any knowledge of the
customers. Kim and Solomon (2016) point out that CBA also shares a large body of
customer information with agents. The branch managers have control over the usage of
the data by their agents. Thus, this lead further transfer of data in unauthorised manner
which once again shows the lack of control which CBA owns over the data it holds in its
DBMS.
The third factor which surfaces upon analysis of the data loss issue is
inherent lack of sustainability and stakeholder concerns within CBA. The bank in
its official website claims its commitment to sustainability and stakeholders’ concerns.
The loss of sensitive customer data actually proved this claims by the bank false.
Christl, Kopp and Riechert (2017) mention that the customer database enable the
management of the bank and the middle level managers predict future needs of the
customers like their plan to buy property which might lead to sale of housing loan for the
bank. Thus, it is evident from the discussion that database of customers hold very
significant place in the decision making process of the bank. Thus, in reality bank is
jeoparadised its own business generation by losing the data. Thus, it can be said in
other words that CBA has endangered its own financial sustainability. The concern
which OECD raises about the lack of ethics in banking practices is perfectly exemplified
by the data loss in CBA (Oecdobserver.org. 2018). Kim and Solomon (2016) can again
be reiterated in this respect to point out that CBA has already shown its failure to protect

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customer interest by loss of data. Now, in the light of the ethical concerns raised by
OECD, it can be pointed out that CBA has failed to protect the interest of international
bodies as well. It can also be pointed out that ASX requires the companies listed on it
including CBA to act in a transparent and fair manner. It can be pointed out that CBA
has breached the policies of ASX, one of its key stakeholders. Thus, CBA has shown
gross lack of responsibility both towards its own sustainability and stakeholder
responsibility which actually climaxed in the form of data loss.
4.0. Discuss issue using relevant IB framework-international marketing issues:
The loss of data of CBA has also given rise to several international marketing
issues. This is because the operations of CBA are not limited to Australia and issues
like data loss can have serious implications on the marketing of the products of CBA.
Moreover, the sensitive news spread very fast through the online newspaper portals
which are accessible to the global consumer base. Thus, surfacing of the
aforementioned factors would lead to serious international marketing implications
(Martin, Borah and Palmatier 2017). The framework which would form the base of
the issues would be customer satisfaction framework. The following are the
marketing issues which CBA would likely face in the event of the issues like data loss:
Loss of customer satisfaction and loyalty:
The losing of data could lead Commonwealth Bank of Australia to lose its
customers’ satisfaction and loyalty to competitors. Macdonald, Kleinaltenkamp and
Wilson (2016) today customers are far more aware and demand more responsibility
from the side of the banks while serving them. The customers are not only concerned
with initial account opening amounts and charges but also about quality of services like

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digital banking. Paul, Mittal, and Srivastav (2016) support this discussion and point out
that customers view data loss as the signs of deteriorating services and demeaning
capacity of banks to protect their privacy. It can be pointed out in this issues that CBA
due to data loss has hampered customers’ trusts. Thus, it would encourage customers
to shift their accounts totally or in majority proportion to competitor banks. The outcome
of this losing of customers would be waning revenue generation and weakening market
image.
Weakening of brand name:
Yoganathan, Jebarajakirthy and Thaichon (2015) mention that losing of
customers weaken the brand name. Bilgihan (2016) mentions in this respect that the
relationship between banks and customers to a great extent on trust. Commonwealth
Bank of Australia by losing data has evidently breached customers’ trusts. Thus, it
would lose its customers which would gradually weaken its brand name in the market.

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Figure 1. Table showing intangible assets of CBA for year ending 2017
(Source: Commbank.com.au. 2018)
Weakening financial performance (other issue):
The table above shows that the value of intangible assets held by CBA and its
Group as on year end 2017. The incidence of data loss took place in 2018 and its
impact on the goodwill of the bank is not available. As far as value of goodwill is
concerned, the closing balance of goodwill for the group is $ 7872 million compared to $
7925 in 2016 while the value of goodwill of the bank remains constant in both the years.
Considering the international presence of CBA (Fatma, Rahman and Khan 2015), it can
be pointed out that decreasing goodwill of the bank shows its waning brand value. The
intangible asset acquisitions shows a decrease by $ 2 million while no new brand

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names were acquired during the period. It can be pointed out in the light in these
findings that the financial performances of the bank is not at all positive. Moreover,
losing customers due to data loss would further weaken it and its market value.
5.0. Critique:
The issue of data loss happened in CBA due to slack database management
system in the 2018. The bank lost data of as many as 20 million in its global market and
caused immense concern among them. The data loss happened not only due to its data
management system and but also due to unavailability of the backup data base to
replenish losses of data.
5.1. Implications and challenges based on findings on CBA (IB company):
The data loss caused the following implications and challenges on
Commonwealth Bank of Australia:
Implication 1: Legal actions:
The loss of data and customer compliant can result in legal actions against CBA.
This would lead to increase in the legal expenditure. Moreover, the data loss which
proves the slack in customer management and ethical standards. This breach is
sufficient to attract actions from ASX which can have implications on the capital raising
of the bank.
Implication 2: Losing investors and hampering reputation
Commonwealth Bank would be losing its investors due to waning revenue and its
consequent power to give back high returns. This weakening revenue and capital
generation would lead to further repulsion of investors. Moreover, lowering of goodwill

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would further advertise the financial weakening of the bank. This would lead to falling in
the share index and demand for CBA shares. The outcome would be weakening the
position of CBA compared to its competitors in terms of capital generation as well. This
is evident from the share chart below. The news of data loss surfaced around May 2,
2018 and the share price of the bank shows a downward movement. The share price
recovered around July 2018, again fell around August.
Figure 2. Share index of CBA
(Source: Asx.com.au. 2018)

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Challenge 1: Financial sustainability:
Jacobs et al. (2016) point out that weakening financial position would create
sustainability challenge before the bank. This is because the financial assets form the
base of all other operations right from marketing to human resources operations. Thus,
it is evident that weakening financial position of the bank would affect all its operations,
thus causing sustainability challenge (Asx.com.au. 2018).
Challenge 2: Competitive advantage challenge:
The losing of customers and investors to competitor banks would hamper the
competitive advantage CBA enjoys in the global market. The challenge is very grave
because CBA has face competition from strong domestic banks in Australia as well as
Australian subsidiaries of the foreign banks. Again, the foreign markets like India and
China, the bank faces competition from international banks as well as resident banks. It
must also be mentioned that all the major banks like CBA are public sector companies
(Strand, Freeman and Hockerts 2015). Thus, losing customers and investors can have
serious devastating impact on CBA both in Australia as well as in the host markets.
7.0. Recommendations:
The following are the recommendations which can be made to CBA on the basis
of the above findings:
Recommendation 1: Strategies to improve data base security system
CBA should strengthen its data base security system and operate more ethically.
The bank should exhibit high level of responsibility towards stakeholder benefits.

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Recommendation 2:
CBA should supervise the usage of data by both its on roll employees and off roll
agents. This would minimise chances of data loss.
8.0. Conclusion:
It can be concluded that the international business practices of CBA are highly
negative with issues like data loss for several years. The bank has exhibited lack of
responsibility towards primary stakeholders as well as key stakeholders. The bank
should take steps to prevent such issues in the future.

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9.0. References:
Asx.com.au. 2018. Asx.com.au. [online] Available at:
https://www.asx.com.au/prices/charting/?
code=CBA&compareCode=&chartType=LINE&priceMovingAverage1=&priceMovingAve
rage2=&volumeIndicator=BAR&volumeMovingAverage=&timeframe=monthly
[Accessed 17 Oct. 2018].
Bilgihan, A., 2016. Gen Y customer loyalty in online shopping: An integrated model of
trust, user experience and branding. Computers in Human Behavior, 61, pp.103-113.
Christl, W., Kopp, K. and Riechert, P.U., 2017. HOW COMPANIES USE PERSONAL
DATA AGAINST PEOPLE.
Commbank.com.au. 2018. Commbank.com.au. [online] Available at:
https://www.commbank.com.au/about-us/careers/working-here/retail-banking-services/
customer-sales-service.html [Accessed 17 Oct. 2018].
Fatma, M., Rahman, Z. and Khan, I., 2015. Building company reputation and brand
equity through CSR: the mediating role of trust. International Journal of Bank
Marketing, 33(6), pp.840-856.
Hassan, R.S., Nawaz, A., Lashari, M.N. and Zafar, F., 2015. Effect of customer
relationship management on customer satisfaction. Procedia economics and
finance, 23, pp.563-567.
Jacobs, K., Lebel, L., Buizer, J., Addams, L., Matson, P., McCullough, E., Garden, P.,
Saliba, G. and Finan, T., 2016. Linking knowledge with action in the pursuit of

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sustainable water-resources management. Proceedings of the National Academy of
Sciences, 113(17), pp.4591-4596.
Kim, D. and Solomon, M.G., 2016. Fundamentals of information systems security.
Jones & Bartlett Publishers.
Macdonald, E.K., Kleinaltenkamp, M. and Wilson, H.N., 2016. How business customers
judge solutions: Solution quality and value in use. Journal of Marketing, 80(3), pp.96-
120.
Martin, K.D., Borah, A. and Palmatier, R.W., 2017. Data privacy: Effects on customer
and firm performance. Journal of Marketing, 81(1), pp.36-58.
Oecdobserver.org. 2018. Oecdobserver.org. [online] Available at:
http://oecdobserver.org/news/fullstory.php/aid/4017/Banking,_ethics_and_good_principl
es_.html [Accessed 17 Oct. 2018].
Paul, J., Mittal, A. and Srivastav, G., 2016. Impact of service quality on customer
satisfaction in private and public sector banks. International Journal of Bank
Marketing, 34(5), pp.606-622.
Paul, J., Mittal, A. and Srivastav, G., 2016. Impact of service quality on customer
satisfaction in private and public sector banks. International Journal of Bank
Marketing, 34(5), pp.606-622.
Ramachandran, M. and Chang, V., 2016. Towards performance evaluation of cloud
service providers for cloud data security. International Journal of Information
Management, 36(4), pp.618-625.

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Strand, R., Freeman, R.E. and Hockerts, K., 2015. Corporate social responsibility and
sustainability in Scandinavia: An overview. Journal of Business Ethics, 127(1), pp.1-15.
Yoganathan, D., Jebarajakirthy, C. and Thaichon, P., 2015. The influence of relationship
marketing orientation on brand equity in banks. Journal of Retailing and Consumer
Services, 26, pp.14-22.