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MBA 3rd Sem
Definition: Management Information Systems (MIS) is the term given to the discipline focused on the integration of
computer systems with the aims and objectives on an organization. The development and management of information technology tools assists executives and the general workforce in performing any tasks related to the processing of information. MIS and business systems are especially useful in the collation of business data and the production of reports to be used as tools for decision making.
Management information systems (MIS) are a combination of hardware and software used to process information automatically. Commonly, MIS are used within organizations to allow many individuals to access and modify information. In most situations, the management information system mainly operates behind the scenes, and the user community is rarely involved or even aware of the processes that are handled by the system. A computer system used to process orders for a business could be considered a management information system because it is assisting users in automating processes related to orders. Other examples of modern management information systems are websites that process transactions for an organization or even those that serve support requests to users. A simple example of a management information system might be the support website for a product, because it automatically returns information to the end user after some initial input is provided.
MIS may be viewed as a mean for transformation of data, which are used as information in decision-making processes. Figure shows this understanding about information as data processed for a definite purpose.
Figure: MIS and decision-making process
There are so many definitions of MIS. For the purpose of this research, MIS can be defined as a system providing management with accurate and timely information necessary to facilitate the decision-making process and enable the organisation’s planning, control, and operational functions to be carried out effectively. So in this way MISs increase competitiveness of the firm by reducing cost and improving processing speed. MIS is by its very nature an eclectic discipline. It is the study of providing information to people who must make choices about the disposition of valuable resources in a timely, accurate, and complete manner at a minimum of cognitive and economic cost for acquisition, processing, storage, and retrieval. The beauty of MIS is that it ties together a whole set of operations that general managers already thought were important (such as reporting, financial controls, and production scheduling) and bound them to the exciting but disruptive technology of the computer, thus blurring distinctions between the technical and the managerial.
A management information system (MIS) is a system or process that provides the information necessary to manage an organization effectively. MIS and the information it generates are generally considered essential components of prudent and reasonable business decisions. The importance of maintaining a consistent approach to the development, use, and
Faculty: Vivek Srivastava
Risk management involves four main elements: • Policies or practices. To the other extreme it is also those everyday financial accounting systems that are used to ensure basic control is maintained over financial recordkeeping activities. a written policy is not required by the OCC. limit. MIS is a critical component of the institution's overall risk management strategy. • Feedback devices. the OCC may require management to establish written MIS policies to formally communicate risk parameters and controls in this area. operational processes and feedback devices are intertwined and cannot easily be viewed separately. employees. manage resources. measure. If however.Management Information Systems ` MBA 3rd Sem review of MIS systems within the institution must be an ongoing concern of both bank management and OCC examiners. Sound fundamental principles for MIS review include proper internal controls. MIS provides the means through which the institution's activities are monitored and information is distributed to management. • Support the organization's strategic goals and direction. An institution's MIS should be designed to achieve the following goals: • Enhance communication among employees. The most efficient and useable MIS should be both operational and informational. minicomputers. an organization may choose to establish and express these sound principles in writing. management can use MIS to measure performance. Because MIS supplies decision makers with facts. operating procedures and safeguards. • Reduce expenses related to labor-intensive manual activities. and provide for effective MIS review and monitoring systems throughout the organization. and audit coverage. At other levels. MIS can also be used by management to provide feedback on the effectiveness of risk controls. The effective deliveries of an institution's products and services are supported by the MIS. As such. These should be followed throughout the institution in the development. • Provide an objective system for recording and aggregating information. it supports and enhances the overall decision making process. MIS should be used to recognize. • Staff and management. they may not necessarily balance. Accordingly. technology also increases the potential for inaccurate reporting and flawed decision making. maintenance. It should be supportive of the institution's longer term strategic goals and objectives. and manage risks. controls must ensure that systems on smaller computers have processing controls that are as well defined and as effective as those commonly found on the traditionally larger mainframe systems. Correspondingly. and procedures for the organization. MIS supports management's ability to perform such reviews. One example of this would be the managing and reporting of loans to insiders. These systems should be accessible and useable at all appropriate levels of the organization. monitor. it provides the data and information to help the board and management make strategic decisions. MIS can be maintained and developed by either manual or automated systems or a combination of both. management follows sound fundamental principles and governs the risk in the MIS Review area. However. It should always be sufficient to meet an institution's unique business goals and objectives. If sound principles are not effectively practiced. Financial accounting systems and subsystems are just one type of institutional MIS. and use of all MIS. For example. policies or practices. although MIS and accounting reconcilement totals for related listings and activities should be similar. since MIS often originates from multiple equipment platforms including mainframes. All institutions must set up a framework of sound fundamental principles that identify risk. • Deliver complex material throughout the institution. Applications of MIS Faculty: Vivek Srivastava 2 . In addition. reconciling and correcting entries used to reconcile the financial systems to the general ledger are not always immediately entered into other MIS systems. accrual adjustments. and customers. and the assignment of duties and responsibilities to staff and managers. Frequently. The OCC fully endorses and supports placing these principles in writing to enhance effective communications throughout the institution. MIS should have a clearly defined framework of guidelines. establish controls. Effective MIS should ensure the appropriate presentation formats and time frames required by operations and senior management are met. MIS also enhances job performance throughout an institution. At the most senior levels. and microcomputers. Because data can be extracted from many financial and transaction systems. Controls are developed to support the proper management of risk through the institution's policies or practices. appropriate control procedures must be set up to ensure that information is correct and relevant. and help an institution comply with regulatory requirements. Financial accounting systems are an important functional element or part of the total MIS structure. operational processes. Commonly. they are more narrowly focused on the internal balancing of an institution's books to the general ledger and other financial accounting subsystems. MIS is viewed and used at many levels by management. standards. • Operational processes. Technology advances have increased both the availability and volume of information management and the directors have available for both planning and decision making.
Management uses MIS to help in the assessment of risk within an institution. interest rate. completeness. there are several specific fields in which MIS has become invaluable. there's hardly any large business that does not rely extensively on their IT systems. or other compliance-related activities. fair lending. market/pricing. allowing for faster decision making and quicker reflexes for the enterprise as a whole. MIS must be "useable. Assessing Vulnerability to MIS Risk To function effectively as an interacting. an institution's MIS should be capable of providing and distributing current information to appropriate users. Timeliness To simplify prompt decision making. poorly programmed or non-secure systems in which data can be manipulated and/or systems requiring ongoing repairs can easily disrupt routine work flow and can lead to incorrect decisions or impaired planning. consistency. interrelated. A flawed MIS causes operational risks and can adversely affect an organization's monitoring of its fiduciary. MIS systems can also use these raw data to run simulations – hypothetical scenarios that answer a range of ‘what if’ questions regarding alterations in strategy. Strategy Support While computers cannot create business strategies by themselves they can assist management in understanding the effects of their strategies. or the expectation of events that could adversely affect earnings or capital. MIS risk can extend to all levels of the operations. MIS systems can provide predictions about the effect on sales that an alteration in price would have on a product. and help enable effective decision-making. inaccurate. The usefulness of MIS is hindered whenever one or more of these elements is compromised." The five elements of a useable MIS system are: timeliness. By studying these reports decision-makers can identify patterns and trends that would have remained unseen if the raw data were consulted manually. summarize results. and be able to adjust and correct errors promptly. Computers can provide financial statements and performance reports to assist in the planning. (Also go through the other applications discussed in class) Risks Associated With MIS Risk reflects the potential. Bank Secrecy Act. the likelihood. monitoring and implementation of strategy. or foreign currency. MIS systems can be used to transform data into information useful for decision making. liquidity. Information systems should be designed to expedite reporting of information. and relevance. Additionally. The system should be able to quickly collect and edit data. but they also provide a valuable time saving benefit to the workforce. consumer. accuracy. Management decisions based upon ineffective. Data Processing Not only do MIS systems allow for the collation of vast amounts of business data. Where in the past business information had to be manually processed for filing and analysis it can now be entered quickly and easily onto a computer by a data processor. For instance. Since management requires information to assess and monitor performance at all levels of the organization.Management Information Systems ` MBA 3rd Sem With computers being as ubiquitous as they are today. Faculty: Vivek Srivastava 3 . However. These Decision Support Systems (DSS) enable more informed decision making within an enterprise than would be possible without MIS systems. or incomplete MIS may increase risk in a number of areas such as credit quality. MIS systems provide a valuable function in that they can collate into coherent reports unmanageable volumes of data that would otherwise be broadly useless to decision makers. and interdependent feedback tool for management and staff.
clearly communicated to appropriate employees. Consistency To be reliable. • Program development and negotiation of contracts with equipment and software vendors. An "owner" is a system user who knows current customer and constituent needs and also has budget authority to fund new projects. Management should also consider use of "project management techniques" to monitor progress as the MIS system is being developed. it is more difficult for management to measure and monitor the success of new initiatives and the progress of ongoing projects. Reports should be designed to eliminate clutter and voluminous detail.Management Information Systems Accuracy ` MBA 3rd Sem A sound system of automated and manual internal controls must exist throughout all information systems processing activities. departmental or area mid-level managers. thereby avoiding "information overload. • Input instructions. because data collection and reporting processes will change over time. They should also be used in support of the long term strategic MIS and business planning initiatives. • Installation and maintenance of the system. Information should receive appropriate editing. balancing. user manuals should be available and provide the following information: • A brief description of the application or system. Management also should ensure that managers and staff receive initial and ongoing training in MIS. and task organization. management must establish sound procedures to allow for systems changes. the development of meaningful systems. In addition. Although MIS does not necessarily reduce expenses. approval points as the system is developed or acquired.and long-range planning efforts. Management needs to ensure that MIS systems are developed according to a sound methodology that encompasses the following phases: • Appropriate analysis of system alternatives. In addition. MIS must be appropriate to support the management level using it. A comprehensive internal and external audit program should be employed to ensure the adequacy of internal controls. Information that is inappropriate. Internal controls must be woven into the processes and periodically reviewed by auditors. For example. Achieving Sound MIS The development of sound MIS is the result of the development and enforcement of a culture of system ownership. Erroneous decisions invariably misallocate and/or waste resources. unnecessary. executive management. • Development of user instructions. Faculty: Vivek Srivastava 4 . including collection points and times to send updated information. Completeness Decision makers need complete and pertinent information in a summarized form. or too detailed for effective decision making has no value. • Balancing and reconciliation procedures. The relevance and level of detail provided through MIS systems directly correlate to what is needed by the board of directors. will lessen the probability that erroneous decisions will be made because of inaccurate or untimely information. Two common examples of this would be the management of mergers and acquisitions or the continuing development and the introduction of new products and services. and their proper use. Building "ownership" promotes pride in institution processes and helps ensure accountability. To achieve sound MIS. training. including samples. and internal control checks. These procedures should be well defined and documented. at a tactical level MIS systems and report output should support the annual operating plan and budgetary processes. and should include an effective monitoring system. • A complete listing of output reports. and testing of the system. in the performance of their jobs. Without the development of an effective MIS." Relevance Information provided to management must be relevant. This may result in an adverse impact on earnings and/or capital. MIS which meets the five elements of useability is a critical ingredient to an institution's short. Variations in how data is collected and reported can distort information and trend analysis. data should be processed and compiled consistently and uniformly. the organization's planning process should include consideration of MIS needs at both the tactical and strategic levels. etc.
narrow Detailed Historical Highly current High Very frequent (USES the information of Both the ends for varied purposes) Largely external Very wide Aggregate Future Less current Low Less frequent Faculty: Vivek Srivastava 5 . and programmers. Information Requirements by Decision category CHARACTERISTICS OF INFORMATION OPERATIONAL CONTROL (FIRST LINE) TACTICAL CONTROL (MIDDLE LEVEL) STRATEGIC PLANNING (TOP LEVEL) Source Scope Level of aggregation Time horizon Currency Required accuracy Frequency of use Largely internal Well defined. an institution may need to use different manuals for different users such as first-level users. unit managers.Management Information Systems ` MBA 3rd Sem Depending on the size and complexity of its MIS system.
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