Information System As A Key Tool For Organisations: A Case Study Of Commonwealth Bank

Role of Information Systems in Businesses

Information system nowadays has turned in to the fundamental tools for every organisation. Information’s system can be illustrated as a computerised orientation that involves human objects and extensive computing operations with a goal to translate information. Being the feature of operation support system and management associated system, it is needed to be updated and continuously improved. The main role of the information system within the company is to assist the business process and operations, decision making of the managers and develop strategies to improve the competitive edge of the organisation. For an organisation such as the Commonwealth Bank of Australia, they need a renewed and standard information system to govern their IT operations.

 The information system can be placed in the case study of Commonwealth Bank, as the organisation faced major charges of breach of anti-money laundering and counter-terrorism financing activities. In this context, the Sydney police found almost $3million in banking recipients, among them some of which were printed by CBA deposit machines. These issues were due to the lack of inadequate IT governance and improper information system operations.

In this context, the aim of the study is to provide answers to the questions of the case study by establishing the understanding of information system knowledge to help CBA to deal with anti-money laundering issue. The study will be emphasising on major areas of information system in evaluating the important role in CBA operations. Based on this the report will be providing valuable suggestions to deal with the issue. 

According to Hutchens (2018), increasing preferences for cashless ATM transaction is an essential factor that driving the growth of intelligent cash deposit machines in the market. Financial organisation are consistently focusing on the up gradation of their ATM settings to improve the security as well as convenience to deliver a personalised system of banking to their customer.

Considering the advantages the company used this deposit system, but their money laundering issue took place owing to problems in this process. Moreover, due to the rise in the number of bank accounts and functions such as one-time access code, with the expansion of banking channels are the potential triggers of intelligent cash deposit system (Thompson et al. 2015).

This is an advanced foundation of information technology that is used by CBA. This system has helped the bank in rolling out IDM’s by reducing the cost and deposit more than $1.24 million of counter cost (Hutchens, 2018). The company believed that this system will help them to enhance the customer relationship with an effective accessibly of accounts.

Anti-Money Laundering Issues at Commonwealth Bank

The acquisition method is the primary reason and the method followed by Common wealth Bank for installing information. They used different accounting software such as XERO, MYOB that are cloud software used by them to address competitive forces in the market. The major features of these software’s were to track inventory, purchase order management and management of tax

In August 2018 Austrac declared that it has decided to sue CBA for 53,700 charged breached of money laundering and counter-terrorism financing laws. The case is associated with CBA’s use of intelligent deposit machines that is a type of machines introduced in the year 2012 that allows the consumers to anonymously deposit as well as transfer cash (Commbank.com.au 2018).

The investigation undertaken by the federal government, NSW police and Western Australia police reported that these machines were being used by CBA for money laundering in illicit proceeds of committing a crime. However, CBA has agreed to pay a civil fine of $700 million and Austrac’s legal cost of $2.5 m for resolving the case. The organisation has originally offered an estimated fine of $375 m (Commbank.com.au 2018).

The share price of the bank jumped from $68.70 to $70.23 after the announcement of the penalty. The company also accepted that they failed this due to lack of appropriate examination of money laundering and terrorist financing risk of its intelligent deposit machines. The company failed to introduce a proper system of control to resolve and manage the risk in IT governance and financial reporting system. In addition to this, the company admitted that they did not comply with the necessities of its anti-money laundering and counter-terrorism issues associated swath supervising transactions on almost 778,370 accounts (Molla et al. 2014).

 These are the major findings from the case study of Commonwealth Bank that asserts it is not just the issue of money laundering and counter-terrorism but the lack of proper information’s system operation that lead the company to make such a blunder. 

As stated by Sadgrove (2016), effective governance within the organisation is necessary for the successful adoption and functions of Information within the organisation for developing the functions. In this context, the IT is needed to be built in accordance with the requirement of the organisation. The IT system needs to be developed on the basis of organisational governance with COBIT 5 framework (García-Holgado et al. 2015). In this regards, organisations are required to evaluate and comply with the legal standards while utilising technology within the organisation. 

Advantages of Cloud-Based and Web-Based Software

As stated by Haworth (2016), the major aim of COBIT framework is to offer administration and business operations with an effective IT governing set up that addressing in offering a standard form of information technology and help them in dealing with the risk issues. In addition to this, COBIT framework provides a direction on t most of the effective method to sort issues that take place in terms of IT operations. According to Gillingham, P. and Graham (2016), the operating model of COBIT helps an organisation to identify all kinds of activities associated with IT operation so that they can use and understand the processes.

Apart from these, COBIT 5 also provides supportive guidelines on each step that are needed to be done that results in effective performance of the organisation (Breese et al. 2015). Therefore, this system of IT framework will help Commonwealth Bank to set up a meaningful objective. Alongside this feature, this will also help them in bringing maturity in processes by enabling them to access the level of maturity of every transaction that is made.

Problems in software

The cloud based and web based software used by them had several problems and security issues. The private information stored in the software is limited since web based and cloud based software are prone to hacking. Apart from these, the company had major loopholes due to the lack of expertise employees to use this software and implementation of this software required high cost investment.

As stated by Chugh et al. (2016), this stores data could not be retrieved at any point of time whenever required. An immediate access to data could have helped CBA’s issues on security transaction. In addition to this, the manager of the organisation was not able to use an online transaction in which they will be able to connect with their customers electronically.

Problems in hardware

The company did not install proper financial software that was in line with the size of the organisation, software that secure. The company lacked effective control planning system, as a result of which they did not have any skilled employees to manage the system, and software that could provide technical assistance to the employees.

However, this will likewise offer efficient service to their customers and thus will provide high security to their suspicious financial system (Gonzálvez-Gallego et al. 2017). The combination of this system will offer high advantages on their reporting system and in obtaining upgraded data thereby evaluating them at all levels of management.

Implementing COBIT 5 Framework

According to Reijers et al. (2015), Agile software development is an umbrella term for a group of process and activities that are generally based on values and guidelines expressed through the agile process. In this process, the solution evolves through collaboration in between self-organisation and cross functions in between groups while using the suitable practices within the organisation.  Sun et al. (2017) state that agile processes are a practice that helps to promote continuous iteration of development and test throughout the system of software development lifecycle.

According to Duffield and Whitty (2015), it is an agile process that helps in the incremental as well as an iterative approach to the development of software design. These systems are suitable information system for Commonwealth Bank. The business organisation is in utmost need of this system for satisfying the problem faced by the organisation and thereby leading them in making effective decisions. 

The agile system of technology not provides effective results and customer retention but also helps in providing the best control system over the financial transaction. Unlike the traditional system of technology, the agile process helps to meet the requirement in case of delayed projects (Antonius et al. 2015). However, the method is needed to be used in accordance with the relevant shape and size of the organisation. The user interface of the agile technology helps to make the interface easily understandable and operate-able.

Apart from this, the system is most recommended for CBA as it helps to deliver a better system of control and will allow them to make changes as per requirements. Hasan et al. (2017) argue that agile software development is the latest technologies, therefore, there may be some breaches while using the agile operations.  Therefore, the commonwealth bank before using this needs to have launched the limit to their system like a maximum deposit to restrict limitless transaction.

Information system

As stated by Molla et al. (2014), the information system is consistently changing and growing with the advancement of technology. Information’s system has established as the crucial source for managing a modern organisation for all small and large enterprises. In the current period business environment is unstable, inactive and turbulent in nature with the increasing demand for accurate, all-inclusive and sensible financial information that is required for progressing towards effective decision making.

As stated by Alotaibi and Liu (2017), the information system of technology can be illustrated as the mixture of software, hardware, physical settings and financial operations of the organisation that help in control planning, synchronisation and decision making of the management operations. Additionally, information system would help as a necessary source of change within CBA IT management, and financial reporting system in using their resources in a proper way.

Potential of Agile Software Development in Information Systems

 

Figure 1: Application of information system

(Source: Theriou 2015)

 

Figure 2:  Processes of Information management system

(Source: Thompson et al. 2015)

Supporting business process and functions

Müller et al. (2016) stated that transaction process system (TPS) and Suspicions transaction report (STR) play and crucial role in business, the daily transaction such as collecting money and operating invoices, payment, financial transaction are organised with the help of this systems. Corresponding to this statement, Commonwealth bank failed to apply this system, as a result of which the organisation was not able to track the huge financial transaction that took place.

After the deposit of heavy amount CBA should have reported enquiries over the case by reporting to the financial reporting unit (Vassilakaki and Moniarou-Papaconstantinou 2015). In this context, a suspicious transaction report is a process that financial institutions can use to report the occurrence of any suspicious financial transactions to FIU. In this context, all the employees and managing directors are restricted from disclosing the confidential information associated with the case.

Supporting business decision

A decision support system is a crucial tool that supports business executives and employees in making decisions as well as managing control planning system. There is various kind of system that can be used under these systems like management information operations that helps in assisting lower level of management in solving issues and making decisions (Rosemann and vom Brooke 2015).

The decisions support system (DDS) emphasises on building the leadership of the senior management employees of the organisation by providing the employees with innovative ideas to solve major issues. On the contrary, Prasad and Green (2015) state that executive information’s system that helps in combination several structures of MIS as well as DSS. In addition to this-this helps to access internal as well as external data that are relevant to the organisation objective.

In relation to the case study of commonwealth bank, there are major problems in dealing with the operational structure, control planning and supervising operations of management control system this system will help CBA to take appropriate measures to financial operations and manage the decision making regarding IT issues (Alotaibi and Liu 2017). Moreover, a proper system of control can be used by them to resolve and manage the risk in IT governance and financial reporting system.

Ethical issues and security

Along with the advancement of technology, there is a chance of vulnerability that is needed to be taken in to account about information security. It is has been stated by researches that preservation of confidential information and access information is necessary for the large organisations. One of the vast blunders they could take place is due to the hacking of confidential information from the corporate database, therefore, it is risky if the organisational does focus on privacy and security issues.

There are threats from malware, wireless, security system, online hacking, spear phishing and unauthorised access to the system. Therefore, the organisation needs to provide each of the departments with the ability to personally access data at various level. Every team present within Commonwealth Bank needs to be able to access customer information fast and needs to be able to detect the threat in their IT operations to prevent the occurrence of money laundering and other transaction issue

Through this system of Data warehousing, difficulty in handling transaction and relative cost systems could be managed easily. Apart from these, data warehouse settings is a major IT infrastructure that could be used CBA (Myers and Venable 2014). This system offers up to date business information on an in time basis. Data warehousing is a method wherein the business entities tends to store their data which can be used for the future purpose.

These processes are under the management classification of the information system which helps in assisting the management decision making. Management information system is systems that offer information on the basis of specified reports provided with a display to assist the business decision making. According to Luftman et al. (2015), it is a useful tool that helps in producing required information for making day to day decision making for Commonwealth Bank. It could also help them in delivering on time information for the issues that are faced by the organisation that needed an immediate response.  

As reported by Edwards (2015), all organisation manages their own data warehouse both historical as well as existing data to make a strategic decision. Therefore, effective data warehouse inside the information system is vital for developing a strong relationship with the customers. This could have helped the CBA in rebuilding the relationship with their customers by obtaining detailed information about the client activities (Luftman et al. 2017). If necessary, they could even track the actions of the customers to prevent money laundering breaches 

Therefore, the strategic information system is a necessity to process that will help the organisation to change and alter their business strategy by reducing the impact of the money laundering issues. It can be typically used by the organisation to streamline and fastening the reaction for adopting environmental changes and help them in achieving a competitive edge.

 The key recommendations for Commonwealth Bank on the basis of a strategic information system are as followed:

• Decision support system that will help them in establishing a strategic approach to align with the operations of information system as well as information technology with the organisational objectives.
• Primary enterprise resource planning using, suspicious transaction report, and IT governance. This process will help the company to integrate the business operation while helping them to accomplish the business objectives for the utilising the business resources. In addition t they will be able to detect the suspicions risk in their future.
• Database reporting system provided with the data mining abilities will help them to make use of the best available corporate information while making an appropriate decision on financial issues, IT operations. The SIS operations will help in facilitating recognition of collected data and help in optimising functioning opportunities,
• The real-time information system will help them to manage the rapid response to risky issues and to maintain standard quality indicators within the organisation.
• It is very important to manage the change in an effective way that could be done by the organisation by properly managing the process.
• Effective change management can be carried out by the organisation through a few steps. This would help them, without impacting the normal and daily going operations of the business

Conclusion

Therefore, from the study, it is evident that Commonwealth bank is facing major issue running the business occurred due to money laundering and counter anti-terrorism act. Based on the study, it can be said that there are several type of information system that can be implemented by the organisation that would boost customer retention and a smooth transaction. The specific IS that is required for CBA is a strong IT governance and proper planning system for handling management information system. For implementing these information strong IT framework is required that will help them to interact and involve with all the stakeholders in an efficient way.

However, the study elucidates that information system offers several benefits to the organisation, but there are also a few disadvantages like the security of data and ethical problems. These problems can be solved with the help of strong security governing system such COBIT IT framework and transparency in between employees, major risk issues can be managed and reduced to a certain level.

Therefore, the most suitable advice to the Commonwealth Bank is that they are required to implement a proper information system and that needs to dine with effective care. The change needs to be informed to all the individual employees. Moreover, if they follow the recommended steps, it would help them in developing a smooth and fast transaction system with an improved performance and enhanced competitive position in the market. 

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