Management Control Systems

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Essay Management Control Systems MIBank

1. INTRODUCTION

This report has been created for the purposes of discussion of the current management control systems in place in the public sector team to analyse strengths and recommend changes to improve any lack of controls identified.

Performance Management Controls:
Within organisations, performance measurement is dominated by management control systems that are focused on control rather than improvement.. Having a better understanding of the operational activities of the business and building this understanding into control systems design; connecting control systems with business strategy, which has to some extent been addressed by the proponents of strategic management accounting (see below); and focusing on the external environment within which the business operates, through a value-chain based approach will improve control systems and performance of the organisation greatly. .

Anthony (1965) once said, on one hand, that management control is the process through which managers use their power to influence other members of the organisation to implement strategies, to realize goals and objectives and, on the other hand, it integrates facts on long, medium and short terms, having well determined implications in human factors, objectives and assignments.

There are other various risk management and operational management controls in place within the bank but these are not control systems put in place by the team although team members due have to adhere to these control procedures and policies. These have not been reviewed for the purposes of this report.

2. OVERVIEW OF MANAGEMENT CONTROL SYSTEM

In order to improve any current MCS system we must first understand the reason why MIBank or any organisation puts control systems in place in order that improvements to better control do not hinder the desired outcomes

2.1. Background

Robert Anthony, (1965) defines Management Control as “the process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of the organisation’s objectives “ *

* Effective MCS are imperative for a number of reasons:
* safeguarding of bank assets,
* limiting or controlling risks,
* achieving the bank’s objectives
* producing reliable financial reports
* complying with laws and all regulatory requirements (local e.g. SARB and international Basel)

Control systems are put in place also to measure performance, make decisions, evaluate processes and as a method to detect mistakes caused by distractions, carelessness, fatigue, errors in judgment, inadequate training, unclear instructions, as well as fraud or deliberate noncompliance with bank policies and processes.

What is important to note, for the purposes of this report and which also forms part of recommendations below, is that even an extremely well designed MCS is still subject to execution risk and consistent application of the system.

2.2. Management Control Systems: Role and Necessity

There are 2 key areas of focus in managing any organisation, namely Planning and Control: 1. Planning entails determining priorities and resource allocation and a mechanism by which execution of these plans can be controlled. 2. Controlling - Management Control is the process by which management ensures that the organisation carries out its strategies effectively and efficiently.

Planning and Control can be broken down into 3 functions which cannot be separated as “without objectives and plans, control is not possible because performance has to be measured against some established criteria” (Koontz and Weirich, 1988)

Figure 1: 3 inseparable Functions of Planning & Control
Robert Anthony (1965)

2. CONTROL SYSTEMS WITHIN THE PUBLIC SECTOR TEAM

Some theory has been written on Frameworks for Management Control which breaks it up into 2 dimensions namely : 1.) management...
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