Explanation:
Bank acquisition programs are notorious for generating incompatible legacy systems that do not communicate—or at a minimum, communicate poorly with each other. The inability of Regional Bank’s systems to recognize that the same customer’s account is being represented as multiple accounts opens the door for potentially excessive credit risk to that single client. The concentration of credit exposure to one client is not being accurately indicated by the lack of data quality across systems.
(Book 1, Module 7.1, LO 7.b)
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Question 39
Regional Bank has been evaluating the numerous data sources and processes used among its units after a decade-long acquisition program. One of the interesting findings relates to the bank determining that individual customers were being represented across systems with different customer identification codes. Which of the following represents potentially the biggest risk that different identification codes have on Regional Bank?
A
Marketing risk due to sending multiple offers to the same customer.
B
Reputational risk due to overestimating the needs of the bank’s customer base.
C
Regulatory risk due to not following statutory data quality guidelines.
D
Concentration risk due to data not indicating the true credit risk of individual customers.
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