Management Information Systems.docx

Management Information Systems.docx

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ManagementInformationSystems

ManagementInformationSystems

Background

Amanagementinformationsystem（MIS）isasystemorprocessthatprovidestheinformationnecessarytomanageanorganizationeffectively.MISandtheinformationitgeneratesaregenerallyconsideredessentialcomponentsofprudentandreasonablebusinessdecisions.

Theimportanceofmaintainingaconsistentapproachtothedevelopment,use,andreviewofMISsystemswithintheinstitutionmustbeanongoingconcernofbothbankmanagementandOCCexaminers.MISshouldhaveaclearlydefinedframeworkofguidelines,policiesorpractices,standards,andproceduresfortheorganization.Theseshouldbefollowedthroughouttheinstitutioninthedevelopment,maintenance,anduseofallMIS.

MISisviewedandusedatmanylevelsbymanagement.Itshouldbesupportiveoftheinstitution'slongertermstrategicgoalsandobjectives.Totheotherextremeitisalsothoseeverydayfinancialaccountingsystemsthatareusedtoensurebasiccontrolismaintainedoverfinancialrecordkeepingactivities.

FinancialaccountingsystemsandsubsystemsarejustonetypeofinstitutionalMIS.FinancialaccountingsystemsareanimportantfunctionalelementorpartofthetotalMISstructure.However,theyaremorenarrowlyfocusedontheinternalbalancingofaninstitution'sbookstothegeneralledgerandotherfinancialaccountingsubsystems.Forexample,accrualadjustments,reconcilingandcorrectingentriesusedtoreconcilethefinancialsystemstothegeneralledgerarenotalwaysimmediatelyenteredintootherMISsystems.Accordingly,althoughMISandaccountingreconcilementtotalsforrelatedlistingsandactivitiesshouldbesimilar,theymaynotnecessarilybalance.

Aninstitution'sMISshouldbedesignedtoachievethefollowinggoals:

•Enhancecommunicationamongemployees.

•Delivercomplexmaterialthroughouttheinstitution.

•Provideanobjectivesystemforrecordingandaggregatinginformation.

•Reduceexpensesrelatedtolabor-intensivemanualactivities.

•Supporttheorganization'sstrategicgoalsanddirection.

BecauseMISsuppliesdecisionmakerswithfacts,itsupportsandenhancestheoveralldecisionmakingprocess.MISalsoenhancesjobperformancethroughoutaninstitution.Atthemostseniorlevels,itprovidesthedataandinformationtohelptheboardandmanagementmakestrategicdecisions.Atotherlevels,MISprovidesthemeansthroughwhichtheinstitution'sactivitiesaremonitoredandinformationisdistributedtomanagement,employees,andcustomers.

EffectiveMISshouldensuretheappropriatepresentationformatsandtimeframesrequiredbyoperationsandseniormanagementaremet.MIScanbemaintainedanddevelopedbyeithermanualorautomatedsystemsoracombinationofboth.Itshouldalwaysbesufficienttomeetaninstitution'suniquebusinessgoalsandobjectives.Theeffectivedeliveriesofaninstitution'sproductsandservicesaresupportedbytheMIS.Thesesystemsshouldbeaccessibleanduseableatallappropriatelevelsoftheorganization.

MISisacriticalcomponentoftheinstitution'soverallriskmanagementstrategy.MISsupportsmanagement'sabilitytoperformsuchreviews.MISshouldbeusedtorecognize,monitor,measure,limit,andmanagerisks.Riskmanagementinvolvesfourmainelements:

•Policiesorpractices.

•Operationalprocesses.

•Staffandmanagement.

•Feedbackdevices.

Frequently,operationalprocessesandfeedbackdevicesareintertwinedandcannoteasilybeviewedseparately.ThemostefficientanduseableMISshouldbebothoperationalandinformational.Assuch,managementcanuseMIStomeasureperformance,manageresources,andhelpaninstitutioncomplywithregulatoryrequirements.Oneexampleofthiswouldbethemanagingandreportingofloanstoinsiders.MIScanalsobeusedbymanagementtoprovidefeedbackontheeffectivenessofriskcontrols.Controlsaredevelopedtosupportthepropermanagementofriskthroughtheinstitution'spoliciesorpractices,operationalprocesses,andtheassignmentofdutiesandresponsibilitiestostaffandmanagers.

Technologyadvanceshaveincreasedboththeavailabilityandvolumeofinformationmanagementandthedirectorshaveavailableforbothplanninganddecisionmaking.Correspondingly,technologyalsoincreasesthepotentialforinaccuratereportingandflaweddecisionmaking.Becausedatacanbeextractedfrommanyfinancialandtransactionsystems,appropriatecontrolproceduresmustbesetuptoensurethatinformationiscorrectandrelevant.Inaddition,sinceMISoftenoriginatesfrommultipleequipmentplatformsincludingmainframes,minicomputers,andmicrocomputers,controlsmustensurethatsystemsonsmallercomputershaveprocessingcontrolsthatareaswelldefinedandaseffectiveasthosecommonlyfoundonthetraditionallylargermainframesystems.

Allinstitutionsmustsetupaframeworkofsoundfundamentalprinciplesthatidentifyrisk,establishcontrols,andprovideforeffectiveMISreviewandmonitoringsystemsthroughouttheorganization.Commonly,anorganizationmaychoosetoestablishandexpressthesesoundprinciplesinwriting.TheOCCfullyendorsesandsupportsplacingtheseprinciplesinwritingtoenhanceeffectivecommunicationsthroughouttheinstitution.Ifhowever,managementfollowssoundfundamentalprinciplesandgovernstheriskintheMISReviewarea,awrittenpolicyisnotrequiredbytheOCC.Ifsoundprinciplesarenoteffectivelypracticed,theOCCmayrequiremanagementtoestablishwrittenMISpoliciestoformallycommunicateriskparametersandcontrolsinthisarea.

SoundfundamentalprinciplesforMISreviewincludeproperinternalcontrols,operatingproceduresandsafeguards,andauditcoverage.Theseprinciplesareexplainedthroughoutthisbooklet.

RisksAssociatedWithMIS

Riskreflectsthepotential,thelikelihood,ortheexpectationofeventsthatcouldadverselyaffectearningsorcapital.ManagementusesMIStohelpintheassessmentofriskwithinaninstitution.Managementdecisionsbaseduponineffective,inaccurate,orincompleteMISmayincreaseriskinanumberofareassuchascreditquality,liquidity,market/pricing,interestrate,orforeigncurrency.AflawedMIScausesoperationalrisksandcanadverselyaffectanorganization'smonitoringofitsfiduciary,consumer,fairlending,BankSecrecyAct,orothercompliance-relatedactivities.

Sincemanagementrequiresinformationtoassessandmonitorperformanceatalllevelsoftheorganization,MISriskcanextendtoalllevelsoftheoperations.Additionally,poorlyprogrammedornon-securesystemsinwhichdatacanbemanipulatedand/orsystemsrequiringongoingrepairscaneasilydisruptroutineworkflowandcanleadtoincorrectdecisionsorimpairedplanning.

AssessingVulnerabilityToMISRisk

Tofunctioneffectivelyasaninteracting,interrelated,andinterdependentfeedbacktoolformanagementandstaff,MISmustbe"useable."ThefiveelementsofauseableMISsystemare:

timeliness,accuracy,consistency,completeness,andrelevance.TheusefulnessofMISishinderedwheneveroneormoreoftheseelementsiscompromised.

Timeliness

Tosimplifypromptdecisionmaking,aninstitution'sMISshouldbecapableofprovidinganddistributingcurrentinformationtoappropriateusers.Informationsystemsshouldbedesignedtoexpeditereportingofinformation.Thesystemshouldbeabletoquicklycollectandeditdata,summarizeresults,andbeabletoadjustandcorrecterrorspromptly.

Accuracy

Asoundsystemofautomatedandmanualinternalcontrolsmustexistthroughoutallinformationsystemsprocessingactivities.Informationshouldreceiveappropriateediting,balancing,andinternalcontrolchecks.Acomprehensiveinternalandexternalauditprogramshouldbeemployedtoensuretheadequacyofinternalcontrols.

Consistency

Tobereliable,datashouldbeprocessedandcompiledconsistentlyanduniformly.Variationsinhowdataiscollectedandreportedcandistortinformationandtrendanalysis.Inaddition,becausedatacollectionandreportingprocesseswillchangeovertime,managementmustestablishsoundprocedurestoallowforsystemschanges.Theseproceduresshouldbewelldefinedanddocumented,clearlycommunicatedtoappropriateemployees,andshouldincludeaneffectivemonitoringsystem.

Completeness

Decisionmakersneedcompleteandpertinentinformationinasummarizedform.Reportsshouldbedesignedtoeliminateclutterandvoluminousdetail,therebyavoiding"informationoverload."

Relevance

Informationprovidedtomanagementmustberelevant.Informationthatisinappropriate,unnecessary,ortoodetailedforeffectivedecisionmakinghasnovalue.MISmustbeappropriatetosupportthemanagementlevelusingit.TherelevanceandlevelofdetailprovidedthroughMISsystemsdirectlycorrelatetowhatisneededbytheboardofdirectors,executivemanagement,departmentalorareamid-levelmanagers,etc.intheperformanceoftheirjobs.

AchievingSoundMIS

ThedevelopmentofsoundMISistheresultofthedevelopmentandenforcementofacultureofsystemownership.An"owner"isasystemuserwhoknowscurrentcustomerandconstituentneedsandalsohasbudgetauthoritytofundnewprojects.Building"ownership"promotesprideininstitutionprocessesandhelpsensureaccountability.

AlthoughMISdoesnotnecessarilyreduceexpenses,thedevelopmentofmeaningfulsystems,andtheirproperuse,willlessentheprobabilitythaterroneousdecisionswillbemadebecauseofinaccurateoruntimelyinformation.Erroneousdecisionsinvariablymisallocateand/orwasteresources.Thismayresultinanadverseimpactonearningsand/orcapital.

MISwhichmeetsthefiveelementsofuseabilityisacriticalingredienttoaninsti