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| KakaoBank headquarters at Pangyo in Seongnam City, Gyeonggi Province / Newsis |
By Anna J. Park
The Financial Supervisory Service (FSS) has urged KakaoBank to revamp its disaster contingency planning, issuing management precautions and pinpointing areas of improvement.
According to the FSS on Monday, the digital bank's annual disaster drills, conducted once every year, are not effective enough to counter emergency scenarios.
"KakaoBank's business impact analysis (BIA) shows the digital bank falls short of prior consultation procedures among various business units, while the business continuity in banking and IT departments is to be managed separately. The bank also lacks a management report system in determining critical business activities in BIA, raising concerns about unclear accountability," the FSS' official report on the matter reads, adding that the internet-only bank places a lower priority on real-time services for customers during business disruptions.
The BIA refers to the process of determining the significance of business activities and resource requirements to ensure operational resilience and continuity of operations during and after a business emergency.
"The FSS urges the bank to establish official procedures through which banking and IT units jointly examine key business activities in carrying out the BIA plans," the FSS said. "Additionally, the FSS calls on the bank to overhaul its internal criteria and procedures to come up with a proper recovery time objective (RTO) ― the maximum acceptable time that a network or system can be down after an unexpected emergency or failure takes place."
The watchdog agency also criticized the internet-only bank for not conducting disaster contingency drills in association with external institutions. The financial authority also ordered the bank to follow through on the results of disaster drills, aiming to improve the efficacy of such contingency plans.
The financial watchdog agency's rebuke of the digital bank comes six months after a fire at a data center used by Kakao caused unprecedented and massive service disruptions last October. A fire broke out last year at a building of SK C&C, which housed data centers for both Kakao and Naver. The accident disrupted KakaoTalk, the most dominant messenger app in Korea, for nearly a day, and also caused malfunctions in Kakao Pay, the big tech's mobile payment service, as well as Kakao T, a transportation service app. The fact that Naver's services were restored just a few hours after the same fire's outbreak showed Naver's better preparedness compared to Kakao's contingency planning.
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