Milestone 1

PROJECT PROPOSAL

The scope of the system is to focus on the exchange bureau of one specific branch of the National Bank. Only subsequently to proving its effectiveness will we be employing a bank-wide implementation. Inclusion of the parent departments will be essential to cement the effectiveness of the newly proposed business process. The business processes we will be concentrating on are the International and Exchange bureau.

DEFINITION OF COMPONENTS OF THE IS

Data - We will be implementing the database approach to act as the data stores (e.g., Buy/Sell rate data store transforms to Buy/Sell database table, Ledger data store transforms to Ledger database tables)

Inputs - Rates that go to the International subsystem from the REUTER’s system (e.g., automated electronically with the flexibility of administrative intervention) replaces the hardcopy of the rate sheets

Transaction sheet for deposit/withdrawal (in the form of tangible items treated differently from cash through the Center)

Outputs - Compare ledger to tangible items and a transaction report that is batched daily is generated that documents that there is balance between ledger and tangible items.

Processes - International Subsystem processes (DFD level 1 proposed)

          Exchange Bureau Subsystem processes (DFD level 2 proposed)

Interface - Conversion from test base to GUI interface

WORK PLAN

The project addresses the strategic aspects of the foreign currency system changeover that is important to National Bank. Secondly, a definition of the scope of changeover issues in information systems is presented, and a comparison is made with the year 2000 problem. The section concludes with an analysis of critical success factors.

The following terms will be used with the meanings as defined:

• Information systems - The combination of software and hardware that is used by an enterprise for recording, processing and storing information

• Hardware - The actual physical computer equipment that is used

• Software - The application software that actually deals with the financial information

• Financial information system - Information system that deals with financial information such as invoices, payments, accounts, etc.

• Historical financial information - The term historical financial information is used to indicate all financial information that has been recorded in a financial information system prior to the introduction of the new system. Such financial information can relate to past, present, or future transactions (payments received, accounts receivable, and orders placed), assets and liabilities (inventory levels and mortgages), or financial information on others than the enterprise itself (a bank's creditworthiness files on borrowers). Storing financial information is necessary in order to account for the past, manage the present, and plan for the future.

• General ledger - The general ledger is a financial information system that is used for bookkeeping. It is used to record the assets, liabilities, income and expenses of an enterprise. A subledger is an information system that records transactions in detail. Usually subledgers are linked to the general ledger, which records only part of the details or a summary of the details.

IT environment

The bank also needs to consider the quality, structure, and organization of its IT environment when planning for the introduction of the proposed system. In many cases the existing IT infrastructure of banks is far from perfect, for example:

a. Enterprise A has acquired several other enterprises over the past ten years. Consequently, many different information systems are in use that perform more or less the same tasks. Preparing for such a changeover could mean that this enterprise has to make similar modifications to, for example, five or six information systems that perform the same tasks. Such a duplication of efforts can be both inefficient and expensive.

b. Enterprise B has been using an information system for the past 15 years. As a result of the changing business environment and new functionality demands by users, the system is now becoming obsolete. Normally, the system would be used for an additional four or five years before replacement. However, the prospect of a potentially expensive upgrade to deal with the changeover might be reason to opt for an early replacement.

These examples show that a modification of all existing information systems may well not be an automatic choice as the most attractive changeover strategy. In both examples there is an underlying need to improve the IT environment; the system changeover (in combination with the year 2000 problem) may trigger banks to make more fundamental changes in their IT environments.

These scenarios are certainly not meant as an exhaustive list of possible strategic considerations, which may be fundamental to the future of the bank. However, it is clear that strategic considerations should be taken into account when modifying the present information systems for the incorporation of other foreign currencies.

ISSUES IN INFORMATION SYSTEMS

To prepare an information systems for the introduction of the proposed system it is important to establish which information systems by the changes. The basic rule is that:

From a practical and organizational point of view it may be convenient to deal with the foreign currencies and the year 2000 problem at the same time. However, there is a fundamental distinction between the two:

1. Solving the year 2000 problems means ensuring that the information systems will continue to do what they always did, that is calculate the dates correctly. This makes the year 2000 problem largely a technical problem that needs technical solutions. The users of the information systems must be involved in the process of identifying the potential problems. Furthermore, management support for year 2000 projects is important to ensure that these projects receive sufficient attention from the users and that the business consequences of non-compliance are properly understood. However, most of the actual work on remedying the year 2000 problem will have to be done by the information technology (IT) department of the enterprise
2. Solving the system changeover issues will in many cases mean that functionality must be added to the financial information systems. Adding functionality means that the users must be heavily involved in firstly identifying problem areas and then in finding the solutions for these problems. It also requires management to take decisions on the functionality to be added, because these decisions will affect the daily operations of the enterprise during the transitional period. Therefore, the National Bank's inefficiencies are not primarily IT problems.

Before starting the actual work on planning the changeover, the firm must have a good overview of its financial information systems. This step is rather technical because it requires the enterprise to do the following:

• Make a list of information systems that deal with financial information. Increasingly enterprises are discovering that they use more information systems than they previously realized. Often branches of larger enterprises have implemented information systems that provide functionality beyond that of the standard software used by the enterprise. Many systems, ranging from cash registers to spreadsheets, are often conveniently forgotten when discussing information systems. Underestimating the number of systems that need to be changed can cause enormous problems once the changeover strategy has been determined.
• Document technical details as to the way information systems are implemented:

• Was the software purchased from a third party, or was it custom designed for the enterprise

• What programming language or technique was used to implement the systems. Well documented systems that are programmed in a modern programming language using an underlying (relational) database management system are easiest to modify. However, systems that

1. are programmed using utilities no longer used by the enterprise,
2. are programmed in a spreadsheet,
3. that use a unique data format,
4. that are poorly documented, and
5. that are programmed by an employee who has left the company, may be particularly difficult to modify.

• Is the hardware affected by the changeover. Some software problems are also hardware problems because the software has been embedded into systems as firmware (software that is encoded in hardware, ROM). Such software can only be upgraded by replacing the hardware (for example cash registers).

• Determine dependencies between systems. Dependencies through links or interfaces determine to a large extent whether a gradual approach towards the changeover is feasible. It is important to realize that not all dependencies are internal (within the enterprise), but that external dependencies (for example with customers or suppliers) might exist as well. Additionally, dependencies between systems greatly increase the complexity of the changeover problems.

Conducting a systems inventory has clear commonalties with the approach taken in dealing with the year 2000 problem and if tackled in this light the synergies can be exploited to help reduce overall costs and efforts.

Internal controls

Introducing new information systems or modifying existing ones is not a routine process in most enterprises. This in combination with the proposed system changeover, which by definition is not routine, leads to certain risks for which the bank needs to be prepared:

• Testing new systems - Changes in the information systems should be adequately tested before these systems are put into operation.

• Data conversion - Sufficient controls should be in place to avoid fraudulent insertion, modification, or deletion of financial information during the conversion of data files. Substantial risks exist, especially, where end users need to revise and correct the data files manually.

• Suspense or clearing accounts - A well known procedure for dealing with exceptional or unsettled transactions and differences is to put them in a suspense or clearing account by giving them a special code. The risk exists that the conversion will give rise to a substantial number of these "suspense" or "clearing" items. These items need to be analyzed and resolved in time to ensure that no irregularities have occurred, particularly where users tend for convenience to classify other differences as conversion differences in the new system.

• Unusual transactions - Many users rely on their experience to recognize and investigate unusual amounts and transactions. After the system conversion it will take some time before they regain these skills.

• Access privileges - Some users (administrative users) may need additional access rights to the information systems in order to resolve changeover differences. Granting too much access rights to a single user could expose the enterprise to risks.

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