[paper] Investigative report: the system failure of "Mizuho"

What was the cause behind the Mizuho fiasco? Genron-NPO had released an original investigative report online concerning the system failure of "Mizuho," with an aim to decide a desirable state of management for Japanese companies. We had asked more than twenty members of the "Mizuho" staff to the hearing held in preparation of this report. We decided to disclose this report to the public because we thought that the problem of corporate governance that is found in many of the Japanese companies is condensed in the case of "Mizuho." So, we not only pursued the direct cause of the system problems but also attempted to discuss the core of the problem, the governance of management.
The report first checked three points from the management perspective, besides the direct cause of the system problems: whether the preparation was full and adequate; whether the management understood the progress of the preparation process; and whether any measures for risk management were established. As a result of the hearing, the preparation was revealed to have been quite insufficient and it is highly possible that the company decided to start the system before its completion. Also, it became clear that the management was not sufficiently aware of the state of preparation. Although the field staff reported that they were " not quite confident enough to cope with" the various test results or inquiries from clients, these voices of concern only reached some of the management, and the concern was not a consensus in the management as a whole. In addition, risk management did not foresee a crisis of this level. In the first place, management did not fully understand the importance of the computer system. These factors delayed the decision of an integrated system, and led to the premature start with an incomplete system.

As for the fundamental cause of this chaos, one can point to the delay in organizing a new governance framework because of the prolonged strife to take initiative among the three banksE? in the process of amalgamation on an equal basis. The former management of the three banks continued to hold real power after the amalgamation by also sharing the post of CEO of the holding company. Balance among the three banks also had priority in the area of organization control. In this state, incentive remained low for the holding company and each affiliated bank to communicate and cooperate. These peculiar adverse effects for M&A gradually surfaced in the process of integration. Upper management was also involved in the conflicts of interests. There had also been no mechanism to check such problems under this new condition of control-by-share-holding. It was a typical case of failure in management and the decision-making process; and the confusion that followed can be regarded as an epitome of such a state.