Chapter $9-$ Homework

Read Chapter $9,$ especially the parts associated with contemporary strategic controls, informational and behavioral controls. Then, read the following case and answer the questions that follow.

Toronto$-$Dominion Bank and Strategic Control

The Toronto$-$Dominion Bank of Canada is among the world's leading multinational banking firms. Its TD Bank subsidiary is a major player in the U$.$S$.$ retail$-$banking space, where it has enjoyed phenomenal growth since it was established in $2008.$

In October $2012,$ TD Bank faced a challenge when it suffered a massive data breach. A set of backup tapes containing over $1\mathrm{.}4$ million files were lost. The tapes, which were not encrypted, contained the personal information of some $260,000$ of TD Bank's customers, and their loss exposed these customers to possible identity theft. Accused of having failed to adequately protect its customers, TD Bank agreed to pay a penalty of $$850,000$ in a multistate settlement to resolve its data breach shortcomings. The settlement also required that TD Bank implement new precautionary measures against further breaches. Unencrypted backup tapes could no longer be transported, existing security policies had to be reviewed every six months, employees were to receive more training to detect and prevent situations leading to breaches, and customers had to be informed in a timely manner if there was a potential their data had been stolen or lost.

TD Bank's new measures were successful at preventing any further breaches between $2012$ and $2014,$ and the bank continued to grow. However, its parent company, Toronto$-$Dominion, was experiencing some difficulties with its costs. For example, in $2014$ Toronto$-$Dominion's workforce increased $3$ percent, but its total salary and employee benefit costs increased $10$ percent and its incentive compensation grew $18$ percent.

Toronto$-$Dominion was not happy with these trends. Company spokeswoman Crystal Jongeward stated: $$We review our operations on an ongoing basis. We make adjustments to meet the evolving needs of our customers and run our businesses effectively.$$ The company started selectively cutting certain management jobs, including vice president roles and some IT positions. The bank also hired a third$-$party consultancy to review its operations, a move that suggested cost$-$cutting initiatives were going be system$-$wide, not just sporadic.

Anticipating slower growth in $2015,$ new CEO Bharat Masrani signaled that controlling costs would be a high priority. Soon after assuming his new role, Bharat Masrani informed employees and investors alike that the bank would be looking across the organization to identify efficiencies. During the last quarterly earnings call of $2014,$ he said $$I$$m determined we will redouble our efforts to increase efficiency and streamline our cost base. This will be an important area of focus in $2015.$

Sources: Chen, A$.2014.$ TD Bank to pay $$850,000$ in data$-$breach settlement. wsj$.$com, October $15$: np$.$; and Trichur, R$.$ and Dummett, B$..2015.$ TD Bank reviewing costs: More layoffs possible. wsj$.$com, February $12$: np$.$

What is a traditional control system? What is a contemporary control system? How are they different from each other?

Define the following terms and provide $1$ example for each.

Informational controls

Behavioral controls

What type of strategic control system Toronto Bank is using? Explain why you picked that particular control system for the bank. Present evidence from the case to support your selection.

What measures the bank took after its data breach? Why do you think these measures were successful to prevent future problems? In answering this question please incorporate your knowledge about behavioral controls to your answer.

CEO Masrani hires you as a consultant and ask you for an advice to improve efficiency at his bank. What would be your best recommendation$($s$)$ to achieve this task?