Tuesday, October 16, 2007

Management Information System (MIS)

What is system?
System is an established or organized procedure; a method, a set of components for accomplishing some purpose. It is a group of interdependent items that interact regularly to perform a task.
What is business information?
Every business depends on information. It is the means by which data flows from one person or department to another and includes every thing from inter-office mail and telephone links to a computer report. Information is the most vital resource for management. Management functions in darkness in the absence of information. Information is the searchlight. Management Information System is a procedure, system, technique, methodology; a channel through which management of an organization gathers information on various aspects of functioning.
Information management is an umbrella term that consists of all the systems and processes within an organisation for the creation and use of corporate information. Information management is, about the business processes and practices that underpin the creation and use of information.
Need for Management Information System:
Management information system is a core component of management. It is the lifeline of an organisation in the absence of which, an organization cannot function properly. It is the diagnostic tool in the hands of the management of any organization, that helps in knowing and evaluating whether the institution is functioning in a planned and budgeted manner. It also provides helping hand to the management to have proper supervision and control on the functioning.
The purpose of information systems is to process input, maintain files of data about the organisation and produce information, reports and other outputs. It enables managers and employees to continually monitor actual performance and compare it against planned productivity. In case of variance corrective measures are initiated.
All systems have standards against which actual performances are compared. Activities too far above or below standards are noted and corrective measures taken.
Every systems has a basic control model that include -
· A standard for acceptable performance
· A method of measuring actual performance against the standards
· A method for the feedback.
Management Information System (MIS):
In any organisation, decisions are made on various issues that recur regularly (Weekly, monthly, quarterly) and require a certain set of information for making a decision. MIS provides input for managerial decision process and assists management in decision-making and problem solving.
Since the decisions supported by MIS are structured decisions, management of an organisartion knows what factors to consider in making the decisions, and the information needed to formulate decisions is identified.The reports/ information is prepared in a predesigned form and presented in a predetermined format to support these recurring decisions.
Management Information System in Banks (MIS):
In banks, management information system relates to reports based on the transaction. Reports on deposits, advances, recovery, non performing assets, cash and bank balance, interest paid and received etc., are the routine information used by bank management to keep informed on the performance of individual branches / offices. The information is also collected from other external sources on those issues, which directly affect the business of bank viz about economic trend, demand for loans, rate of consumer spending, cost of borrowings etc.
MIS a decision Support system:
MIS is the formal system of gathering, processing, integrating, comparing, analyzing and deciphering information of data and converting it intelligently for providing it to managers at all levels who use it for planning, decision-making, marketing, building better customer relations, monitoring and supervision and control.
MIS is the core of planning. It is comprises collection, manipulation, and dissemination of data or information. The activities involved include inputting, processing and storage of data into information, and preparation of management reports.
MIS is not just statistics and data analysis, but is assessment of human capabilities. It helps in:
· Establishing relevant and measurable objectives
· Monitoring results and performances.
· Alerting organization, on all deviations between results and pre-established objectives and
budgets.
MIS helps in selecting a course of action from among alternatives and plays vital role in decision-making. It helps banks in taking scientific decisions for the problems faced viz., What will be the impact on deposits if the rate of interest on deposit is increased by x % or reduced by y %? What will be impact on advances portfolio if interest rate on advances is increased by x % or reduced by y %? Or what if we open a branch at a particular location or close down a branch at a particular location or merge two branches?
Quality of Information:
The management requires database information for taking policy decisions as well as for taking other corrective measures. A strong build-up of information and data is required for this. The quality of data goes a long way in improving the efficacy of control mechanism. There has to be consistency in the data and it should not be out of date information.
It is not that reporting of correct data is necessary, but its timely submission is must. Delay in submission of a return/information may not only defeat its very purpose, but may expose bank to risks and may also entail penalties if the information of statutory nature is not submitted in time. It is also necessary that the returns/information is not only furnished correctly but is to be submitted in the prescribed formats.
It would thus be observed that following five essential elements are must for any effective management information system. Management decisions and strategies may be rendered invalid or, in fact, detrimental should and one of these components be compromised.
· Timeliness
· Accuracy
· Consistency
· Completeness and
· Relevance
For taking right decisions, it has to be ensured that:
1. The information is current and available to all appropriate users to facilitate timely decisions.
This necessitates prompt collection and editing of data.
2. A sound system of internal controls must be in place to ensure the accuracy of data.
Information should be properly edited and reconciled, with the appropriate control
mechanisms in place.
3. Any change in collection or reporting procedures should be clearly defined, documented and
communicated to all users.
4. Information provided by MIS mechanisms must be complete.
5. Information provided must be relevant.
6. All pertinent information is to be provided in a comprehensive and concise format.
Information Collection in Banks:
Banks operate their business through network of their branches spread over a vast geographical area. Banks control operations and take decision with the help of descriptive and statistical information collected in the form of statements, data, reports etc. Some times MIS is also tailored to meet specific management needs.
Compilation and integration of raw data provided on various facets of operations are analyzed from various angles by controlling authorities for taking policy decisions, guidance, monitoring and control.
Banks gather information not only from its operations i.e. branches /offices but also collect information from other external sources i.e. reports published in media, Information published by Reserve Bank of India and other statutory bodies, Government departments, research organisations/agencies, published reports of other banks and institutions.
It is not that only banks require information for monitoring its affairs, but also those who have stake in the bank i.e. Shareholders, those who deal with the bank, those who supervise, monitor and control the affairs of bank. Even a member of public can call for information under Right of Information Act.
Information is also required for meeting various statutory requirements viz. SLR/CRR; achievement of various targets in respect of directed lending etc.
Utilising information:
The type of information required at different tiers of management varies. At the apex level the information is required for formulation of policies, planning and directing. At the controlling level bank management requires information to find out whether the branches are proceeding as per the plan so that corrective measures can be taken before it is late.
Smart branch managers use data for business growth, monitoring, improving profitability, cash management, reducing operational risks, improving staff productivity, house keeping facing market challenges, supervision of borrowal accounts, reducing Non Performing Assets, making presence in market, improving reputation and market share, and so on so forth.
MIS helps banks in
1. Planning /coordinating
2. Controlling /supervising operations
3. Business Development
4. Profit planning
5. Cash management
6. Risk Management
7. Marketing
8. Decision taking
9. Human resource development
1.Planning /Coordinating
MIS is a tool, which plays important role in planning and budgeting. It helps in preparing long-term vision of a bank, and preparing its road map.It helps in coordinating various functions and functionaries.
2.Controlling /Supervising operations
MIS helps in controlling the affairs of the bank and in ensuring that all activities are being carried out in planned and programmed manner. Inspection is also an important and vital part of management information system. It enables banks in finding out loopholes in it’s operations and in the areas that need prompt action and attention.
3.Business development: -
By analyzing the business data received from branches, banks can find out the trend in the business growth and chalk out detailed business development plan, and marketing strategies.
Since every quarter Reserve Bank of India publishes business figures i.e. Deposits and Advances of banks in a district, individual banks work out their performance in the district in which it has branches and chalks out district wise business strategies.
After comparing the past figures , banks work out whether their market share in a particular district is increasing or decreasing, accordingly they take appropriate corrective measures and decide marketing strategies
4.Profit planning: -
Data related to income and expenditure helps bank in identifying the major areas of cost and income and helps them in augmenting its sources of income and in controlling expenses.
As banks’ major source of income is from its credit portfolio and major outgo of funds is towards meeting interest liabilities, MIS helps in having proper assets and liability management. It also helps banks in analyzing whether its non-interest income is increasing or decreasing. MIS helps in taking corrective measures by analyzing the trend in establishment expenses and other operative expenses.
5. Cash management: -
Proper cash management improves profitability of a bank. MIS helps bank in finding out pockets where heavy cash is generated and for making arrangement of its disposal either by directing surplus / excess cash to Currency Chests or to those branches which have heavy cash requirements. MIS also helps in knowing excess bank balances with its correspondent banks and enables bank in diverting to call money market or investment in Government or other securities.
6.Risk Management: -
MIS helps bank in managing Liquidity risk, Currency Risk, Interest Rate Risk, Credit Risk.
7. Marketing: -

MIS helps banks in scientifically marketing its products and services by scrutinizing the data collected. It also helps in deciding ways and means to serve customers intelligently. Many organisations are using customer relationship management (CRM) software for data based marketing.
Collection of Data: -
Banks collect data both for its internal and the use of other external authorities. These external authorities are the statutory authorities who need information for supervising, controlling and monitory functions of banks. Information is submitted to them in the form of returns, statements and report.
Internal use:
With a view to having proper supervision and control, bank management collects information on various aspects of its operations .On the basis of information, developmental strategies are chalked out. Major and vital information includes Weekly Asset & Liability Statement, statement-containing details of deposits, advances and other assets and liabilities.
The statement is necessary for ascertaining demand and time liability of the bank on which Statutory Liquidity Ratio and Cash Reserve Ratio of a bank is computed and maintained. The data relates to business figures of Friday. In the event of Friday being a Holiday data of the preceding day is mentioned.
External use:
Data is collected for submission to Reserve Bank of India, NABARD, SIDBI, DICGC, etc. These organizations have supervisory role and control mechanism over the banks. The data also helps in deciding economic policies.
Conclusion:
Success of management information system depends much on management philosophy, policies and commitment of its executives. MIS can help in bringing cultural change, which can be achieved only through strong leadership. Effort has to be put into generating a sufficient sense of urgency amongst the entire work force. Since the banks are now are switching over core banking solution, with the click of mouse information on any aspect functioning can be obtained decision on any aspect of managerial functions can be easily taken.

No comments: