Introduction

Enterprise Resource Planning (ERP) is an integration of all the different business processes in real time mode which is implemented and executed with the help of technology and software. It is software to facilitate business management by integrating all the processes and departments through a single technology. It is a continuous process wherein the data and information has to be updated regularly into the software so that the future course of business can be ascertained and the resources of the company can be tracked and allocated accordingly. In this report, the learner will explain the significance and use of ERP modules in the banking industry with an example of the Commonwealth Bank of Australia.

 

Define Business Processes

Business process can be defined as those set of activities that help the business organizations to achieve their organizational goals. The business process has linked tasks that include evidently defined inputs along with a single output. Every business organization has specific performance goals and requirements for which they need a proper business process (Osterwalder and Pigneur, 2010). In case of the banking industry, all the banking organizations face operational pressures that test their effectiveness, efficiency and their business process agility. They continuously aim at building a better business process that can help them to balance their organizational objectives with the desires of the customers in a successful manner. Effective business process helps business organizations to keep up with the changing operational environment.

Commonwealth Bank of Australia is one of the most renowned Australian banks that provides a wide range of financial services to millions of customers. It has been successfully operating since 1911 and has been serving the financial needs of millions of customers. The business goals and strategic vision of Commonwealth Bank is to assist the customers so that they are able to build and manage their wealth effectively (Popp and Meyer, 2010). To achieve their vision, the banking organization has retained their lowest cost structure. Other several strategic steps are taken by Commonwealth Bank to achieve their future business goals and provide the finest of financial services to its valuable customers. Addressing the fulfillment of this particular requirement and goal, Commonwealth Bank should take on a comprehensive program called SAP so that they can modernize their core systems and provide best banking solutions.      

Figure 1: Business Processes

(Source: Akkiraju and Ivan, 2010)

Systems Application and Products (SAP) in Data Processing is one of the most used Enterprise Resource Planning software. With the help of this software, Commonwealth Bank would be able to deliver products and services that are customer-centric. Business software such as customer relationship management, supply chain management, supplier relationship management, and product life-cycle management provide the right business solutions to banking companies (Akkiraju and Ivan, 2010). The main reason behind Commonwealth Bank should join the SAP community is that they wanted to have a better business platform along with an updated technology platform for enhancing their growth.

 

Develop Business Requirements

As Commonwealth Bank is one of the ‘big four’ banks in Australia, it has specific business requirements that can help it serve the needs of the customers. The banking organization’s banking operations include a set of operational challenges, technical prerequisites, security concerns, and complex data volumes. SAP ERP software would help in providing the bank, with one-stop solutions for such problems. The services of Commonwealth Bank include multiple activities like deposits, lending services, money transmissions, and other such services for which the bank aims to maintain stringent secrecy about customer information and affairs and they abide by strict regulations (Buxmann et al., 2012). The software applications of ERP would help the bank in synchronizing and integrating such a wide financial process, support services, and human resource management. Commonwealth Bank’s vision is to build offshore value for its customers. They aim at maximizing the rate of returns for its shareholders for whom they need to supplement their business with better revenue streams from faster and larger growing markets. As the rate of accessibility and reach has increased in the case of financial services, a top-tier banks like Commonwealth Bank is trying to place themselves in this revolution of technology in global terms.  

Figure 2: Banking business process

(Source: Buxmann et al., 2012)

Considering the need of the bank to stay updated with the growing technological advancements, Commonwealth Bank has to make sure to develop products and services that are internet-based. This would help them to achieve growth in their business and provide online banking services to the customers. However, there is an issue of bringing an infrastructural change in the project systems. They would even have to train employees about the new software installed. From the installation to the employee training needs, the banking company would incur huge costs (Schlagwein et al., 2014). As Commonwealth Bank is such a renowned and successfully operating bank, installing any ERP software would help the bank achieve its business objectives. Moreover, SAP is one of the most expensive and leading software, which provides ERP and Financial Accounting solutions. As most of the top-tier banks use SAP, it is considered one of the most high-profile software systems. Hence, Commonwealth Bank can bear the cost of implementing SAP in their financial institution to manage their business process and serve the growing needs of the customers.        

 

Determine the System Requirements

There are millions of customers, with different financial needs, who are associated with the Commonwealth Bank. The bank needs to customize its financial service solutions as per their customer needs. However, they have to develop solutions based on their banking regulations and business modules. ERP software like SAP would help Commonwealth Bank in providing flexibility in its operations and integrate its business module with its service solution modules (Bhattacharya and Seddon, 2011). As per the growing needs of data management and serving the customer needs, Commonwealth Bank should implement installing SAP in their institution. Commonwealth Bank can consider the following advantages of SAP software-

• Banks would be able to merge their payments from different runs by utilizing predefined rules and creating batches that can be given for approvals. Payment attributes like payment methods, house bank, payment origin, amount, currency, value date, and company code can be utilized for batch payments at the same time.
• In the SAP system, both the transactional and file-level acknowledgments can be imported together, which can update the payment status (Abouharb and Duchesne, 2010).
•  SAP can help the bank to update their batch status with which they can set up alerts for customers.
• With the help of SAP software, Commonwealth Bank would be able to prevent payment fraud.
• The payment reconciliation and payment processing automation and efficiency can be increased with the help of SAP software.

Figure 3: Benefits of SAP

(Source: Abouharb and Duchesne, 2010)

Apart from the above-mentioned advantages, there are other advantages of SAP software, which can help Commonwealth Bank in bringing improvement in their end-to-end process and manage their business process. Hence, it can be said that Commonwealth Bank should install ERP software of SAP to meet its business objectives and improve their current performance level. This would not only help the banking company to serve the customer needs, but it would also help it to maintain its performance management.

 

Software and vendor selection

The ERP software chosen by the management of the Commonwealth Bank of Australia is Sap which is an acronym for Systems, Applications & Data Processing. The aim of the software SAP in the banking sector is to use the vision of the customer to deliver products and services which are centered on the customers (Annamalai and Ramayah, 2011). The main aim of implementing SAP in the banking sector is to automate and integrate the banking processes with finance and risk compliance system so that cost reduction can be done. The various reasons for selecting the software of SAP in the business processes of Commonwealth Bank of Australia are as follows:

• Enhanced digitalization: As per the experts of the industry, SAP is the market leader in terms of all the software present in the market. The vendors of the SAP are well equipped and provide all the necessary resources and support to the bank to implement the software successfully (Zare Mehrjerdi, 2010). The digitalization provided is mobile banking, analytics, digital customer help and others.
• Increased accessibility of services: With the help of SAP, the bank will be able to make the services more accessible to the customers.
• Increase in the number of customers: SAP will help the bank to increase their customer base by offering services which are customer centric and lucrative.
• Automation of services: The software uses technology to implement its processes which automates all the processes of the banking sector. The automation of services will ensure enhanced efficiency.

The vendor chosen by the Commonwealth Bank of Australia is SAP which is headquartered in Walldorf. SAP is present in 180 countries and is listed in the Euro Stoxx 50 stock market also. The reasons for choosing SAP as the vendor are as follows:

• Financial Stability: SAP is a well-renowned company that sets up software for various companies across the world. The company is listed on the stock exchange also and has annual revenue of €22.062 billion. The financial stability of the company persuaded the bank to opt for SAP software and company.
• Methodology: SAP has proven its methodology in the market and also its effectiveness in transforming the business processes from old systems to new systems. This was also a reason for the bank to choose SAP (Seethamraju, 2015).
• Professionalism: SAP has maintained its professionalism in the market while dealing with its various clients and also the employees of the company.

 

Determine at least three (3) ways in which companies or organizations utilize such technologies to improve business efficiency

The three methods by which the Commonwealth Bank of Australia utilizes technologies to improve business efficiency are as follows:

• The implementation of ERP software and Sap in the business processes of the bank has helped the bank to manage high volumes of transactions simultaneously. Earlier, the bank had to employ their human resource to process the transactions. The manual efforts lead to a higher rate of errors and processing of a smaller volume of transactions. However, the implementation of the software reduced the human dependency on processing banking transactions and provided scope for the processing of a larger volume of transactions (Monk and Wagner, 2012). All the methods have been automated with the implementation of technology, which has helped the bank process a larger volume of transactions at the same time. This has helped the bank to increase its revenues and also increase the speed of performing its business operations.

Figure 4: SAP implementation in Commonwealth Bank of Australia

(Source: Schlagwein et al., 2014)

• The banking sector is highly prone to risks and security breaches. The banks handle large amounts of public money which they have to keep it safely since the public has laid trust in them. Hence, the implementation of the software in the core processes of the business has helped the Commonwealth Bank of Australia to adopt a robust security measure. The software has been designed as per the business operations and requirements of the bank which has helped the management of the bank to deal with all the security issues. The information of the customers is secured and all the online transactions are secured by introducing firewalls so that the money of the customer is safe.
• The adoption and implementation of the SAP ERP software have helped the bank to integrate its core business processes. All the entities and processes related to the business and business operations have been merged to facilitate improved decision-making. The bank has been able to merge their offline and online transactions which has enhanced the customers’ banking experience (Seddon et al., 2010). With the help of the software, the bank has been able to provide online services to their customers which have helped them to increase their customer service and revenue generation. The business efficiency of the bank has improved considerably with the help of the SAP software.

Figure 5: SAP in the banking sector

(Source: Zare Mehrjerdi, 2010)

 

Evaluate the level of efficiency of the technology implementation

The traditional way of working has faded away with time. To improve business operations, business organizations are now much more focused on a “manual/automatic” way of working (Umar et al., 2016). The present scenario, it has been observed over time now most of the business organizations are highly dependent on “technological” advancement to manage and control the overall business and its operational system. To enhance the efficiency and proficiency level, it is highly essential to adopt the right technology within the organization (Tenhiälä and Helkiö, 2015). To make the flow of operations much more effective, it has been observed that the management Commonwealth Bank of Australia has mainly incorporated the ERP system (SAP) within the organization. The incorporating the ERP system, the Commonwealth Bank of Australia can easily focus on product planning, production planning, materials management as well as inventory management. Through technology implementation, business organizations can easily improve the overall system and focus much on the efficiency level. On the other hand, it directly helps the business organization to increase its flexibility level (Soni et al., 2015).

However, it has been observed that the management of the Commonwealth Bank of Australia was unable to incorporate the system effectively within the organizational system. SAP is considered as one of the advanced systems, that can mainly used to enhance the security level of the existing organizational data and information. However, after the implementation of the system, it has been observed that the employees are not at all comfortable with the implemented system. This has created an adverse impact on the overall flow of business operations. Due to a lack of understanding and knowledge, it was quite challenging for the employees to adopt the system effectively and perform the business operations.

 

Examine potential security risks, data breaches

There are various potentials of security risks and data breaches in the new ERP software that will be implemented by the Commonwealth Bank of Australia. One of the main problems that can affect CBA due to implementing SAP is the chances of an intentional sabotage attack on its service provision process. Since the company will be using the ERP software for monitoring its service provision process, a competitor can attack the software and make changes in it, which can lead to provision of inefficient service or loss of clients’ money. If the hackers get access to the finances or the financial reports of the company, then they will have innumerable opportunities for sabotaging the organization. They can change the credit limit of different clients, operational limit can be changed, theft can be done or transactions that could lead to massive loss for the company can be manipulated.

Figure 6: Growth in data breaches of ERP systems

(Source: Lenart, 2011)

Hackers can easily access the files of the company and give it to the competitors, which can be detrimental for the growth of the company. The competitors can gain access to sensitive data and files pertaining to the company, and use it against CBA to gain a competitive edge. Security breaches like falsification of data can take place on SAP, as the assets of the company will be managed by the new ERP system. If a hacker can gain access to the SAP, then the EAM system of the company can be compromised and the data of the employees and assets among others can be manipulated, which would make it difficult for the company to regain them. Additionally, since the SAP will be incorporated, the payments of employees will be linked to it, and security breaches it can lead to delayed payout or changes in payout amount (Aloini et al., 2012).

Severe or consistent security attacks can significantly impact the reputation of the company, which might lead to the loss of clients. Thus, the management needs to ensure that appropriate measures are taken to minimize these potential risks while implementing the SAP system in the organization so that the operations of the company are not affected and the data is not compromised.

 

Provide guidelines on how these risks could be mitigated

Presently, it has been found that most of the banking organizations are using SAP to maintain the data integrity and security level. One of the major responsibilities, it is to protect the data and effectively use the data. By using this effective software, the banking sector can mainly conduct and perform all business operations manually. It has been observed that there are several loopholes and risks present in the SAP system. Sometimes, it becomes quite challenging for business organizations to use the system in the right way.

 

Effective ways to overcome the risks are as follows:

• Increasing the exchange of cyber understanding and knowledge:

In the present situation, it has been observed that the rate of cybercrime has increased immensely. Especially, it has become much more difficult for the banking sector to monitor and control the level of crime. Therefore, to control the overall system, the management of the organization needs to develop a proper understanding and knowledge of cyber within the individuals.

The management of the organization needs to provide proper training and development to the employees so that it becomes much easier for the individuals to use it. Through this effective sharing of knowledge among individuals, the Commonwealth Bank of Australia can easily identify and overcome any kind of threat. By identifying the threats, the management can take effective actions and grab new opportunities to develop the sharing practice more within the organization.  

• Effective co-ordination to encourage the strategic policy:

In order to overcome the threat and risks, the Commonwealth Bank of Australia needs to develop more co-ordination among the management in order to develop strategic policies. Based on the industry requirement, the management needs to develop tie-ups with the other international banking sectors.  On the other hand, by developing the strategic policy the management can use SAP in much more effective way.

• Needs to develop cyber information:

In recent days, it has been found that the levels of cyber threats are increasing day by day. Therefore, to control the overall impact, international bodies are taking effective initiatives to control the cyber field more.  Commonwealth Bank of Australia needs to develop proper associations so that all individuals can access all the important information and data

 

Conclusion

The implementation of the ERP system in the banking sector has helped all the banks to improve their efficiency and business operations in the market. In this report, the learner has chosen the case study of the Commonwealth Bank of Australia and the SAP implementation procedure to highlight the significance of the ERP modules in the banking sector. The report has discussed the business processes of the bank and also the various business and system requirements concerning the implementation of SAP. The bank has chosen SAP Company as the vendor due its market goodwill and has also evaluated the efficiency of the bank processes after the implementation of the software. The potential risks like hacking and breaches in the firewall securities measures have been discussed along with ways of risk mitigation.

 

 

Reference List

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