Collecting and sharing information

1. Collecting and sharing information Management Level – Paper P2 Advanced Management Accounting Lecture - 30 Vidya Rajawasam ACMA CGMA MBA

2. Collecting and sharing information In the previous lectures we have discussed • Introduction to risk management • Managing risks • Risk management process • Reduction and mitigation • Enterprise risk management

3. Collecting and sharing information In this lecture we will discuss • Information needs • Management levels • Internal control and risk management activities • Information characteristics • Big data

4. Collecting and sharing information Information needs There should be effective channels of communication within the organisation, so that all managers receive timely information that is relevant to the performance of their tasks and duties.

5. Collecting and sharing information Information needs Information should be provided regularly to management so that they can monitor performance with respect to efficiency, effectiveness in achieving targets, economy and quality. • Managers need both internal and external information to make informed business decisions and to report externally.

6. Collecting and sharing information Information needs • The actual information provided to management varies depending on the different levels of management. • Different information systems are available to provide the required information.

7. Collecting and sharing information Management levels The information requirements of managers will vary depending on their specific role with regard to internal control and risk. Within an organisation, management are normally divided into three different levels: strategic, tactical and operational. These three levels of management, as described by Anthony, can be illustrated by the following diagram:

8. Collecting and sharing information Management levels .

9. Collecting and sharing information Management levels In general terms, each level of management will be involved in specific activities:

10. Collecting and sharing information Management levels The two key activities of management are therefore:

11. Collecting and sharing information Internal control and risk management activities The activities of the three management levels internal control and risk are:

12. Collecting and sharing information Internal control and risk management activities The activities of the three management levels internal control and risk are:

13. Collecting and sharing information Internal control and risk management activities The activities of the three management levels internal control and risk are:

14. Collecting and sharing information Information systems for management control The information systems providing that information must therefore vary so that appropriate information is provided to each level of management and focused on their specific objectives regarding internal control and risk. The diagram below reiterates the management levels and indicates the general type of information system that will be provided for that management level.

15. Collecting and sharing information Types of information system • Executive Information System (EIS): a computer based system for total business modeling. It monitors reality and facilitates actions that improve business results. • Management Information System (MIS): a system to convert data from internal and external sources into information, and to communicate that information in an appropriate form to managers at all levels and in all areas of the business to enable them to make timely and effective decisions.

16. Collecting and sharing information Types of information system • Decision Support System (DSS): a computer based system which enable managers to confront ill-structured problems by direct interaction with data and problem-solving programs. • Transaction Processing System (TPS): a system that routinely captures, processes, stores and outputs low level transaction data.

17. Collecting and sharing information Types of information system

18. Collecting and sharing information Types of information system

19. Collecting and sharing information Types of information system

20. Collecting and sharing information Review MCQs The managers information needs are? • Only internal. • Only external. • Both external and internal. • Non of the above

21. Collecting and sharing information Review MCQs The managers information needs are? • Only internal. • Only external. • Both external and internal. • Non of the above

22. Collecting and sharing information Review MCQs Strategic management information needs are ? • Provides additional information related to project costs. • How responsive the project’s NPV is to changes in the variables used • Based on ad hoc and informal information • Non of the above.

23. Collecting and sharing information Review MCQs Strategic management information needs are ? • Provides additional information related to project costs. • How responsive the project’s NPV is to changes in the variables used • Based on ad hoc and informal information. • Non of the above.

24. Collecting and sharing information Information characteristics and quality The information received by management needs to be of a certain standard to be useful in internal control and risk management and monitoring. There should be an adequate, integrated, information system, supplying internal financial, operational and compliance data and relevant external data.

25. Collecting and sharing information Information characteristics and quality The information should meet the criteria of 'good' information (ACCURATE): • Accurate • Complete • Cost-beneficial • User-targeted

26. Collecting and sharing information Information characteristics and quality The information should meet the criteria of 'good' information (ACCURATE): • Relevant • Authoritative • Timely • Easy to use 

27. Collecting and sharing information Information characteristics and quality The characteristics of that information will change depending on the management level using that information.

28. Collecting and sharing information Information characteristics and quality The table below shows the characteristics of information and how their quality varies depending on what is made available.

29. Collecting and sharing information Information characteristics Given that management activities regarding internal control and risk management are different, the characteristics of information provided by the different management information systems will also be different. Characteristics of information for these management decision areas can be summarized as shown below:

30. Collecting and sharing information Information characteristics

31. Collecting and sharing information Information characteristics

32. Collecting and sharing information Information characteristics

33. Collecting and sharing information Information characteristics

34. Collecting and sharing information Information characteristics Just as tactical decision making forms a link between strategic and operational management, the information it requires has some of the characteristics of each. Forecast and historical data are both required, although historical data is not needed as immediately as it is for operational decisions.

35. Collecting and sharing information Information characteristics Information is largely objective and quantitative but the greater experience of middle managers making tactical decisions makes this less important than for operational information. For each of the other information qualities - accuracy, certainty, completeness, breadth and detail - tactical information occupies the mid-point between strategic and operational information. 

36. Collecting and sharing information Big Data Big data is the buzz word which refers to the masses of structured and unstructured information that is collected and stored every moment from mobile phones, websites, social media and various other electronic sources. 

37. Collecting and sharing information Four V’s (Volume, Velocity, Variety and Veracity) This data is so large that traditional database approaches to storage and analysis are simply not sufficient to cope with the sheer amount of data (volume) nor the speed of its arrival (velocity). Not to mention the different formats that that data may take (variety).

38. Collecting and sharing information Four V’s (Volume, Velocity, Variety and Veracity) In addition to this a fourth dimension of Big Data was added which refers to concerns over its Veracity. This recognized that the data may in fact be inaccurate or lack authenticity in its unfiltered, raw form.

39. Collecting and sharing information Four V’s (Volume, Velocity, Variety and Veracity) In addition to this a fourth dimension of Big Data was added which refers to concerns over its Veracity. This recognized that the data may in fact be inaccurate or lack authenticity in its unfiltered, raw form.

40. Collecting and sharing information Benefits / Uses of Big Data Competitive Advantage can be gained if businesses are able to analyze and correctly interpret this data to gain knowledge and insight on customer preferences, buying habits and useful consumer trends or patterns of behaviour.

41. Collecting and sharing information Risks of Big Data Big data brings with it, unique risks of its own. As discussed above, safe storage and security of customer data is of particular concern. Businesses who collect this data need to ensure that customers are informed and have consented to its use. Similarly, data held or purchased should be kept in encrypted form and not be susceptible to data hackers who may attempt to access this confidential information via illegal means.

42. Collecting and sharing information Review MCQs The characteristics of operational information are? • Based on informal and ad hoc information. • Based on actual historical information • Creates a lot of confusion with regard to its application. • Non of the above.

43. Collecting and sharing information Review MCQs The characteristics of operational information are? • Based on informal and ad hoc information. • Based on actual historical information • Creates a lot of confusion with regard to its application. • Non of the above.

44. Collecting and sharing information Review MCQs What is true related to Big data ? • Masses of structured and unstructured information that is collected and stored every moment. b. Very difficult to obtain information. c. There is a lot of confusion with regard to its application. d. Non of the above.

45. Collecting and sharing information Review MCQs What is true related to Big data ? • Masses of structured and unstructured information that is collected and stored every moment. b. Very difficult to obtain information. c. There is a lot of confusion with regard to its application. d. Non of the above.

46. Collecting and sharing information Lecture Summary We have discussed the • Information needs • Management levels • Internal control and risk management activities • Information characteristics • Big data

47. Collecting and sharing information Management Level – Paper P2 Advanced Management Accounting Lecture - 30 Vidya Rajawasam ACMA CGMA MBA