Management Information Systems in Banking

Table of Modules

Introduction ............................................................................................................................... 3

1. What is a Management Information System ? ............................................................... 4

1.1 Keywords........................................................................................................................ 4
1.2 To Do .............................................................................................................................. 4
1.3 Instruction....................................................................................................................... 4
1.4 Sources........................................................................................................................... 4
1.5 School Solution Approach and Evaluation Key........................................................ 4
1.6 School Solution Content Indication ............................................................................ 5
1.6.1 Management Information System ....................................................................... 5

2. Developing a Management Information System ............................................................ 7

2.1 Keywords........................................................................................................................ 7
2.2 To Do .............................................................................................................................. 7
2.3 Instruction....................................................................................................................... 7
2.4 Sources......................................................................................................................... 10
2.5 School Solution Approach and Evaluation Key...................................................... 10
2.6 School Solution Content Indication .......................................................................... 10
2.6.1 Analyis ................................................................................................................... 10
2.6.2 Concept ................................................................................................................. 11
2.6.3 Further key performance indicators.................................................................. 11
2.6.4 Why key figures and ratios................................................................................. 11

3. Risk Management and Management Information Systems ....................................... 12

3.1 Keywords...................................................................................................................... 12
3.2 To Do ............................................................................................................................ 12
3.3 Instruction..................................................................................................................... 12
3.4 Sources......................................................................................................................... 12
3.5 School Solution Approach and Evaluation Key...................................................... 13
3.6 School Solution Content Indication .......................................................................... 13
3.6.1 Credit Risk ............................................................................................................ 13
3.6.2 Liquidity Risk ........................................................................................................ 14
3.6.3 Interest Rate Risk ................................................................................................ 14
3.6.4 Operational Risk .................................................................................................. 15
3.6.5 Capital or Solvency Risk..................................................................................... 16

4. Implementation of Management Information Instruments .......................................... 17

4.1 Keywords...................................................................................................................... 17
4.2 To Do ............................................................................................................................ 17
4.3 Instruction..................................................................................................................... 17
4.4 Sources......................................................................................................................... 17
4.5 School Solution Approach and Evaluation Key...................................................... 17
4.6 School Solution Content Indication .......................................................................... 18
4.6.1 Market Research ................................................................................................. 18
4.6.2 Excel Template for Finance and Planning....................................................... 18
5. Management Information Systems and Decision Making ......................................... 19
5.1 Keywords...................................................................................................................... 19
5.2 To Do ............................................................................................................................ 19
5.3 Instruction..................................................................................................................... 19
5.4 Sources......................................................................................................................... 19
5.5 School Solution Approach ......................................................................................... 19
5.6 School Solution Content Indication .......................................................................... 20
5.6.1 Decision Making Approaches ............................................................................ 20
5.6.2 Information and Decision Making...................................................................... 20
5.6.3 Decision Making in Banking............................................................................... 20
5.6.4 Human Computer Interaction............................................................................. 21

6. Management Information Systems and Processes.................................................... 22

6.1 Keywords...................................................................................................................... 22
6.2 To Do ............................................................................................................................ 22
6.3 Instruction..................................................................................................................... 22
6.4 Sources......................................................................................................................... 23
6.5 School Solution Approach and Evaluation Key...................................................... 23
6.6 School Solution Content Indication .......................................................................... 23
6.6.1 Credit Application Process Measurement ....................................................... 23
6.6.2 Suggestions for re-design .................................................................................. 23
6.6.2 Credit Application Process Redesign ............................................................... 24

2
Introduction
Welcome and thanks for choosing Management Information Systems in Banking !

This course aims at providing an understanding of generating and processing

management information in banking organisations and you are the bank
management consultants preparing concepts for TU Banka. After completing the
modules you will be ready to evaluate existing management instruments and
contribute to design new ones. Every section provides keywords and instructions and
requires you to fulfil the tasks as described in a self-directed and creative manner.
The primary source for you to use is the www, where you can deploy the proposed
keywords individually or a combination of them. There are some links provided at the
end of each section to get you started.

There is not one perfect prescribed solution to each of the course modules you
are going to work on. Therefore, the evaluation of your deliverables is purely based
on the research you do and the resulting quality of your work. If there’s no valid
information to answer a question state this and document your findings. Don’t forget
to reference the source you got your input from !

The course is intranet-based at your convenience. You can get the tasks and submit
your deliverables from and to the TU Košice intranet. Additionally, you can make
appointments with me during the week (11.04.2005 – 15.04.2005) for personal
consultation concerning the tasks or contact me via christian.ramke@t-online.de.

Before and after April 11th – 15th you may contact the supervisor of the course
Peter.Mihok@tuke.sk .

“A word you don’t understand ?

www.slovnik.sk is your friend.”

www.investorwords.com and www.Investopedia.com can assist you

concerning definitions of particular banking terms.

3
1. What is a Management Information System ?

1.1 Keywords
Definition, Purpose, Placement, Information System, Executive Information Systems,
Decision Support Systems, Management Information Systems, Transaction
Processing Systems, ____________, ___________, ____________, ____________.

(The spaces are provided for keywords you may wish to add.)

1.2 To Do
Compile a report (2-3 pages).

1.3 Instruction
Your study report should include a definition of Management Information System and
an adequate outline of the position and characteristics of Management Information
Systems compared to other types of information systems. General information on
information systems will do nicely. However, the closer you get to the banking
industry systems the better of course.

1.4 Sources
http://myphliputil.pearsoncmg.com/student/bp_jessup_ist_1/chapter6.ppt

1.5 School Solution Approach and Evaluation Key

Definition Management Information System (60%) + further explanation (35%) + bank
related info (5%)
Definition: Decision Support System (60%) + further explanation (35%) + bank
related info (5%)
Definition: Executive Information System (60%) + further explanation (35%) + bank
related info (5%)
Definition: Transaction Processing System (60%) + further explanation (35%) + bank
related info (5%)

4
1.6 School Solution Content Indication
1.6.1 Management Information System
1.6.1.1 Definition

(1) A computer system designed to help managers plan and direct business and
organizational operations.
(2) Management Information Systems (MIS), are information systems, typically
computer based, that are used within an organization. WordNet described an
information system as "a system consisting of the network of all communication
channels used within an organization".

Source http://www.answers.com/topic/management-information-system (28.04.2005)

1.6.1.2 Further explanation

An information system is comprised of all the components that collect, manipulate,

and disseminate data or information. It usually includes hardware, software, people,
communications systems such as telephone lines, and the data itself. The activities
involved include inputing data, processing of data into information, storage of data
and information, and the production of outputs such as management reports.

As an area of study it is commonly referred to as information technology

management. The study of information systems is usually a commerce and business
administration discipline, and frequently involves software development, but also
distinguishes itself by concentrating on the integration of computer systems with the
aims of the organization. The area of study should not be confused with Computer
Science which is more theoretical and mathematical in nature or with Computer
Engineering which is more engineering.

In business, information systems support business processes and operations,

support decision making, and support competitive strategies.

Source http://www.answers.com/topic/management-information-system (28.04.2005)

5
1.6.1.3 Bank related

Incorporate all the relevant data from every part of your operation into a single
management overview – and then easily produce presentation quality reports

Constant monitoring of your banking operations

CorePlus offers dynamic, real-time statistical reporting facilities across all channels,
account managers, clients, products and branches/profit centers. While the standard
reporting facilities in CorePlus includes over 200 comprehensive reports, the open
design of the system’s relational SQL-compatible database allows you to use
industry-standard enquiry and reporting tools.

Compliance Reporting
Probanx offers complete compliance reporting modules, readily available for various
countries. Since CorePlus is a fully integrated banking system, our compliance
reporting covers all banking operations and complies to Basle II regulations.

User-defined Reports
CorePlus workstations include an easy-to-use Report Writer that enables users to
compile specific data from any number of sources and view it on screen or print-out
in various formats. Data can be sorted or grouped, and values summarised or
averaged.

Source: http://www.probanx.com/EN/products/bankcom/management_info.html
(28.04.2005)

6
2. Developing a Management Information System

2.1 Keywords
Organisation, information demand, design/development of (management) information
systems, designing/developing (management) information system, banking, key
performance indicators, reporting, balanced score card ____________,
______________, ____________, _____________

2.2 To Do
Compile a report (6-8 pages).

2.3 Instruction
Your study report should provide a framework that shows the requirements – input
and output - to be considered when designing an Information System / infrastructure.
More precisely, the framework should be described based on the case study
information provided below. Write two separate parts: analysis and concept. The
analysis should contain the addressees of management information and the
conceptual part should include some explanatory ideas about the key figures and
ratios to be implemented as well as a brief indication of tools to be deployed.

TUB - Technická Univerzita Banka

„Mail us. Trust us. Pay us.”

Assume TUB runs the following organisational units to provide financial services:

Top Management Finance & Planning

Marketing Sales Organisation

E-Banking Branches
7
TUB offers the following services both through branch and web to personal
customers such as students, young professionals and to companies:

• payment services
• cheque account
• Košice Golden Credit Card
• ATM Card
• Loan

You are in charge of designing the management information system for TUB now.
The managers of the departments mentioned above have communicated their
requirements to you (see department-service-matrix below). Subsequently, you are
left to suggest further useful key figures and ratios to be presented by the MIS as the
managers did not populate the table entirely. Feel free to further develop the given
key figures. As you write down the MIS design you are to include some general
statements on its structure, objects, and relations.

8
 Payment Cheque Košice Golden ATM Card Loan
Service Account Credit Card
(=KGCC)
Top Number of Total number Total number of Total number Current total
Management transactions of active KGCC issued / Total of PC / Total amount of loans/
performed cheque number TUB number TUB Total amount of
accounts and customers customers low performing
market share loans
on a monthly
basis
Marketing How can new Product usage Which target Which target Which target
customers be (what products group (customers) group group (customers)
informed about and services demands the KGCC (customers) demands loans ?
TUB – internet, do TUB ? demands the
newspaper ? customers use PC ? Average amount
?) Number of of loan.
applications for Number of
KGCC applications for
PC
Finance and Cost and revenue (Average) Granted amount of Average Earnings from
Planning of transactions Earnings per credit per credit card amount of loans and the rate
cheque transaction of poor performing
account Fees earned from and lost loans.
the card business
Sales (e- Number of Number of Number of active Number of Number of
Banking, transactions done existing KGCC, number transactions applications
Branches) through e- cheque credit cards sold done via ATM received via e-
banking and accounts, coupled with ATM cards banking;
through branches number of new cards Time effort for
cheque consulting
accounts on a customers on loan
monthly basis matters
Organization Number of Pref. channel Number of payment Number of Total number of
transactions and for opening ch. and verification payments / loans
number of accounts requests / number of number of
transactions that (branch, e- failers failures Identify loans >
produced banking); 100.000 € for
problems and number of legal reporting
failures failers

Now as you know about the information demand it is on you to elaborate the more
detailed information/key figures the other departments may wish to obtain from the
system you are about to design. In other words you have to create a kind of balance
scorecard and make a rough draft which tools you would like to suggest to implement
your information instruments.

9
2.4 Sources
http://management.about.com/cs/generalmanagement/a/keyperfindic.htm
http://www.ubs.com/1/e/investors/interactive_report/04q1/investment_bank/key_perfo
rmance_indicators.html
http://www.managementweb.org/events/b/b115/B115_web.pdf

2.5 School Solution Approach and Evaluation Key

Description of framework and requirements (30%)
Rough suggestion of tools / systems to be used for implementation (20%)
Completion of the table with further key performance indicators and ratios (30%)
Brief explanatory statement why certain key figures and ratios (20%)

2.6 School Solution Content Indication

2.6.1 Analysis

2.6.1.1 Framework
The objects involved in the reporting are the departments. External parties such as
government obtaining legal reporting will not be considered here. Following this
convention the addressees of the information system are top management, finance
and planning, marketing, sales and the organization department.

Remark: Students must identify e-banking and branches as non-addressees of MIS

as these units are subordinated to sales.

2.6.1.2 Requirements
The information system must be able to provide the identified organizational units
with key figures provided in the table above. To derive the particular key figures it
must be able to capture business processes and data. As such each organizational
unit – in particular the operational ones such as e-banking and branches – would
have to make sure to enter data resulting from business activities into the system. To
ensure data consistency throughout the bank a centralized solution (one system and
centralized database) are vital.

10
Remark: Students must be aware of and introduce somehow the fact that the quality
of information (key figures and ratios) provided by information systems largely
depends on the quality and quantity of input data.

2.6.2 Concept
Identification of core banking solution products as a more professional IT
infrastructure or the implementation of excel spreadsheets and access database as a
more simple tool to capture and provide information.

2.6.3 Further key performance indicators

(see table; red marked)

2.6.4 Why key figures and ratios

Key figures and ratios are useful instruments to depict an organizations’ activities and
performance.
The top Management needs a general and more high level overview of the activities
in daily business
The Marketing department needs to know what customer groups do demand which
products and what delivery channels do they prefer.
The Finance and Planning team needs to understand the quantity structure
concerning business volume to derive valid information about costs and revenues.
Furthermore they will have to buid their forecasting on these data.
The Sales unit is responsible for its subordinated units e-Banking and the branches.
Therefore, it needs the information for controlling reasons and for top management
reporting too. Another factor may be the performance-related compensation of
branch employees and call center agents.
The organization team is concerned with organizational and IT processes. They have
to make sure that processes run smoothly to ensure the quality of the banks business
processing. They need information on failures and volumes to investigate and finally
eliminate technical and organizational problems.

11
3. Risk Management and Management Information Systems

3.1 Keywords
risk, interest risk, credit risk, return, decision making, ____________, …..

3.2 To Do
Compile a report (6-8 pages).

3.3 Instruction
Your report can be based on the previous tasks and should include measurements
and descriptions at the disposal of the TUB Finance & Planning managers from the
department introduced above. By contrast to the previous task the value you would
have to create for the managers this time is based on their requirements to introduce
some key figures for them to evaluate their business risk. The Finance & Planning
department was assigned to work on the TUB risk management. They have provided
the following information for you. The Finance people are pretty much aware of risks
and have clearly formulated the area of risks they have identified for TUB according
to Koch, T.W.: Bank Management (Orlando: The Dryden Press, 1995): p. 106.
1) Credit risk
2) Liquidity risk
3) Interest Rate Risk
4) Operational Risk
5) Capital or Solvency Risk
You can start out doing your web-research on how to measure the identified types of
risks.

3.4 Sources
http://www.mindtools.com/pages/main/newMN_TED.htm
http://www.sjdm.org/
http://www.mapnp.org/library/prsn_prd/decision.htm#anchor165214
http://www.scu.edu/ethics/practicing/decision/
http://www.pecc.org/publications/papers/issue@pecc/2003/risk-mgmt-in-banking-
sector.pdf
http://db.riskwaters.com/public/showPage.html?page=10705
http://mgtclass.mgt.unm.edu/FIT/Hickey/Chapter%203.PPT
12
3.5 School Solution Approach and Evaluation Key
Definition: Credit risk (60%) + recommendation of measurements (20%) + further
findings (20%)
Definition: Liquidity risk (60%) + recommendation of measurements (20%) + further
findings (20%)
Definition: Interest Rate Risk (60%) + recommendation of measurements (20%) +
further findings (20%)
Definition: Operational Risk (60%) + recommendation of measurements (20%) +
further findings (20%)
Definition: Capital or Solvency Risk (60%) + recommendation of measurements
(20%) + further findings (20%)

3.6 School Solution Content Indication

3.6.1 Credit Risk

Def.: The risk that a counterparty to a financial transaction will fail to fulfil their
obligation.

Source:
http://www.lse.co.uk/financeglossary.asp?searchTerm=credit&iArticleID=1500&definit
ion=credit_risk (28.04.2005)

Measurement / structure:
What has been the loss experience?
Net loss to average total LN&LS
Gross losses to average total LN&LS
Recoveries to avg tot LN&LS
Recoveries to prior period losses.
Net losses by type of LN&LS
What amount of losses do we expect?
Non-current LN&LS to tot loans
Total P/D LN&LS - incl nonaccural
Non-curr restruc LN&LS / GR LN&LS
Curr-Non-curr restruct / GR LN&LS
Past due by loan type
13
Source: http://mgtclass.mgt.unm.edu/FIT/Hickey/Chapter%203.PPT (28.04.2005)

Further explanation: open

3.6.2 Liquidity Risk

Def.: The risk that an organisation may not have, or may not be able to raise, cash
funds when needed.

Source:
http://www.lse.co.uk/financeglossary.asp?searchTerm=liquidity+risk&iArticleID=1225
&definition=liquidity_risk (28.04.2005)

Measurement / structure:

PNC BANK, NATIONAL ASSOCIATION COMMUNITY N

UBPR Dec-00 Dec-01 Dec-00
RISK RATIOS Pg # UBPR PEER1 CALC UBPR PEER1 UBPR PEER7 CA
Liquidity Risk
%Total (EOP) Assets (except where noted)
Total equity 11 8.31% 8.03% 7.81% 7.81% 8.36% 7.30% 8.86% 7
Core deposits 10 63.61% 49.59% 65.14% 66.70% 52.73% 81.21% 72.77% 81
S.T Non-core funding 10 14.37% 28.27% 58.15% 9.74% 25.13% 9.99% 13.45% 82
Avg. Volatile liabilities (% Avg, TA) 6 calc 18.66% 30.00% 13.41% 12.27% 26.21% 11.53% 14.06% 11
Net loans & leases / Total Deposits 10 107.19% 96.26% 85.91% 85.91% 93.01% 70.76% 76.78% 71
Net loans & leases / Core Deposits 10 122.68% 137.94% 95.43% 95.43% 123.0% 79.90% 90.91% 80
Avg. Available for sale securities / Avg. 6 9.52% 15.99% 13.70% 15.09% 15.75% 7.96% 17.39% 12
Short-term investments 10 0.66% 5.81% #N/A 0.74% 6.74% 12.30% 6.72% #N
Pledged securities 10 74.50% 55.99% #N/A 45.01% 52.38% 50.66% 41.89% #N

Source: http://mgtclass.mgt.unm.edu/FIT/Hickey/Chapter%203.PPT (28.04.2005)

Further explanation: open

3.6.3 Interest Rate Risk

Def.: The potential for losses arising from changes in interest rates.

Source:
http://www.lse.co.uk/financeglossary.asp?searchTerm=interest+rate+risk&iArticleID=
130&definition=interest_rate_risk (28.04.2005)

Measurement / structure: n.a. only principles and guidelines

14
Further explanation: open

3.6.4 Operational Risk

Def.: Operational risk arises from the potential that inadequate information systems,
operational problems, breaches in internal controls, fraud, or unforeseen
catastrophes will result in unexpected losses.

Source: http://www.chicagofed.org/banking_information/operational_risk.cfm
(28.04.2005)

Def.: measures the cost efficiency of the bank's activities; i.e., expense control or
productivity.

Source: http://mgtclass.mgt.unm.edu/FIT/Hickey/Chapter%203.PPT (28.04.2005)

Measurement / structure:
Typical ratios focus on:
total assets per employee
total personnel expense per employee
noninterest expense ratio
There is no meaningful way to estimate the likelihood of fraud or other contingencies
from published data
A bank’s operating risk is closely related to its operating policies and processes and
whether is has adequate controls

Source: http://mgtclass.mgt.unm.edu/FIT/Hickey/Chapter%203.PPT (28.04.2005)

Further explanation: open

15
3.6.5 Capital or Solvency Risk
Def.: Capital risk refers to the probability of a bank’s insolvency or potential decrease
in net asset values before economic worth is zero, and is closely related with financial
leverage, which, in turn, refers to the use of debt and preferred stock paying fixed
rates as a part of a firm’s capital structure that increases volatility in income because
of the mandatory interest payments. 43f

Source: Koch, T.W.: Bank Management (Orlando: The Dryden Press, 1995): p. 109

Measurement:
The more risk taken, the greater is the amount of capital required.
Appropriate risk measures include all the risk measures discussed earlier as well as
ratios measuring the ratio of:
tier 1 capital and total risk based capital to risk weighted assets,
equity capital to total assets,
dividend payout, and growth rate in tier 1 capital.

Further explanation: open

16
4. Implementation of Management Information Instruments

4.1 Keywords
implementation, tool, application, core banking software / solution, software solution,
reporting, _________, _________, _________

4.2 To Do
Compile a report (3-6 pages) that provides a starting point how to implement the
management information instruments. While doing so, keep in mind that
management information systems can be very simple instruments, such as excel
sheets and more complex ones, such as software solutions. You can extend the
paper you prepared for task 2.. However, this time it needs to be more detailed and
the focus is on tools and software available. So conduct a competitive web-market-
analysis.

4.3 Instruction
Your report can be based on the task 2. and should consist of two parts. Dedicate
Part 1 to a internet-market-research on core banking / reporting software solutions
including some characterization of the offered solutions (modules etc.). Concerning
part 2 assume you want to present an excel spread sheet to be implemented for
Finance & Planning. You are to design the excel sheet template. In particular, you
have to decide which key performance and risk figures to include and set up an easy
to use layout.

4.4 Sources
http://www.managementweb.org/events/b/b115/B115_web.pdf
http://www.insitebanking.com/
http://www.pcs-sd.com/news/showArticle.asp?NewsID=17
http://www.credit-card-verifier.com/directory/Credit-Card-Processing-Equipment-and-
Software/corporate-banking-software_2.html

4.5 School Solution Approach and Evaluation Key

Conduct market research on the web (50%)
Design Excel Spreadsheet for the Finance & Planning department including key
performance indicators and risk management figures (50%)
17
4.6 School Solution Content Indication

4.6.1 Market Research

http://ch.country.csc.com/de/mcs/mcs162/1037.shtml
http://www.iflexsolutions.com/flexcube/flexcube/flexcube_retailbanking.asp
etc.
(students are to find about 10)

4.6.2 Excel Template for Finance and Planning

Finance and Planning

Products
& Key Figure 01/2005 02/2005 03/2005
Services

Total number
Transactions

Income (fees and charges)

Cost (operations)

Total number of accounts

New opened accounts
Account

Earnings per cheque account

Number of accounts where last

acitivity is older than 3 months

Commisions earned from selling

Credit Card

credit cards

Turnover performed via Credit Cards

Number of active credit cards

Number of active ATM cards

ATM Card

Number of new ATM cards

Number of transactions

Average maturity
Loan

Number of loans
Total loan volume
interest income

18
5. Management Information Systems and Decision Making
5.1 Keywords
decision making (model), management information systems, human computer
interaction, information, ____________, ___________

5.2 To Do
Compile a report (5 pages).

5.3 Instruction
Since TUB intends to implement the Management Information System according to
your proposal the top management asked you to find out about the relation and
interdepencies between information systems and decision making of users to
understand what TUBs benefit from investing in your MIS will be. In particular they
want you to analyse for them what impact on the performance of the organization is
to be expected: To answer their questions collect some information on what is meant
by human computer interaction and what are (MIS-based) decision making models.
By reading your analysis they want to learn about decision making in banking in
general and how information and information systems come into play. You may look
for Morton’s work on Decision Support Systems and Thierauf’s work on Effective
Management Information Systems.

5.4 Sources
http://www.mindtools.com/pages/main/newMN_TED.htm
http://www.sjdm.org/
http://www.mapnp.org/library/prsn_prd/decision.htm#anchor165214
http://www.scu.edu/ethics/practicing/decision/

5.5 School Solution Approach

Documentation of various decision making approaches (25%)
Explaining the relation between information and decision making (25%)
Do research on decision making in banking (risk versus return) (25%)
Define and explain Human Computer interaction (25%)

19
5.6 School Solution Content Indication
5.6.1 Decision Making Approaches
For instance three stages approach such as Morton’s intelligence, design and choice
phases (based on Simon). (1) Intelligence represents the search and analysis for
problems in the relevant area of decision. (2) Design covers the development of
options and courses of action to be taken. (3) The choice phase includes the
selection from the options developed throughout the design phase.

Morton, M.S.S.: Management Decision Systems – Computer-Based Support for

Decision Making (Boston: Division of Research, Graduate School of Management,
Harvard University, 1971)

See also:
Thierauf, R.J,: Effective Management Information Systems – Accent on Current
Practices (Columbus: Charles E. Merrill Publishing Co. – A Bell & Howell Company,
1984)

5.6.2 Information and Decision Making

How does information contribute to decision making. Options to select from – in some
form – are based on information available. Good decision making requires good
information. Decision making individuals may have the problem of not having relevant
and up to date information. And furthermore,

Drummond, H.: Effective Decision Making. A Practical Guide for Management

(London: Kogan Price, 1991)

5.6.3 Decision Making in Banking

Basic pattern: risk and return. Nearly any decision made by bank managers do affect
the risk and return structure of a banking organization. Following this decision making
in banking is mainly driven by components of return or areas of earnings and the
risks taken. Risk can be clustered as suggested before: credit risk, liquidity risk,
interest rate risk, etc.

Fraser, D.R, Fraser, L.M.: Evaluating Commercial Bank Performance – A Guide to

Financial Analysis (Rolling Meadows: Bankers Publishing Company, 1990)
20
5.6.4 Human Computer Interaction
Human-computer interaction is a discipline concerned with the design, evaluation and
implementation of interactive computer systems for human use and with the study of
major phenomena surrounding them.

Source: http://sigchi.org/cdg/cdg2.html#2_1 (03.04.2005)

21
6. Management Information Systems and Processes

6.1 Keywords
balance scorecard, process, measurement, quality management, Sarbanes-Oxley
Act (SOA), (principles of) process design, ____________, ___________

6.2 To Do
Compile a report (5-6 pages).

6.3 Instruction
Since TUB top management is happy with your work they have asked you to suggest
key performance indicators to measure the quantitative and qualitative performance
of the process “Credit Application” as it is shown below. After you have suggested the
measurements for the AS-IS process roughly design a TO-BE process which is more
effective than the AS-IS one (in written or diagram form). To do so, please identify
problem areas and inconsistencies of the current process as a point to start re-design
from.

As-Is Credit Application Process

Customer Branch Back Office IT

Credit
Customer submits Capture Credit
Application Database
credit application Application Data
Form A
1.

N Info Check if
Gather missing
complete ? Credit Applic.
information
is complete

Check Customer Database

Credit History B

2.

Inform Reject Application N Credit History Update Credit

Customer Ok ? History

Release Payment
to Customer
General
Account Ledger

22
The TUB organisation department has introduced two process measurements
example-wise. According to the references in the diagram these being:

1. Number of complete Applications / Total Number of Applications submitted

2. Rejected Credit Applications / Total Number of Applications

6.4 Sources
http://cs.wwc.edu/~aabyan/Design/
http://www.meritid.com/msite/contenta/.php?contentid=82
http://www.bpmtutorial.com/BPM/BPM.aspx?ref=aw

6.5 School Solution Approach and Evaluation Key

Introduction of credit-application-process measurements and problem identification
(50%)
Suggestions for redesign and optimisation of the credit-application-process (50%)

6.6 School Solution Content Indication

6.6.1 Credit Application Process Measurement

Number of credit applications submitted to branches
Number of credit application captured and entered into the system
Number of incomplete credit applications / total number of credit application

6.6.2 Suggestions for re-design

The process redesign should take into account the following problems of the original
process set up.

(1) One problem is that the central back office processes any incoming credit
application. This means the branches just pass the application through to the
headquarter without capturing them. The time effort for capturing the applications
could be divided by the number of branches. In other words, the branches can do the
capturing, which means moderate increased effort for the branches, but saves a lot of
time compared to the central processing approach.

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(2) The individual process steps are not organized very well. One major problem is
that the completeness of credit applications is checked after capturing them in
database A. That causes unnecessary deployment of time and resources, as missing
information needs to collected from the customer and the whole process starts from
the scratch.

(3) Concerning the IT infrastructure it is obvious that the bank has implemented a
decentralized approach. They run two individual databases and a posting system.
Data inconsistency may be one problem arising from this organization.

6.6.2 Credit Application Process Redesign

To-Be Credit Application Process

Customer Branch Back Office IT
Credit
Customer submits
Application
credit application Form

Check if
Credit Applic.
is complete

Gather missing N Info

information complete ?

Y
Capture Credit
Application Data
Check Customer
Credit History

General
Inform Reject Application N Update Credit Database
Credit History
Customer Ok ? History

Release Payment
to Customer
Account

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