Part A OVERVIEW ..........................................................................................

1. Introduction...........................................................................................1

2. Applicability ..........................................................................................2

3. Legal Provision ....................................................................................2

Part B SOUND DATA MANAGEMENT AND MIS PRACTICES ............3

4. Guiding Principles ...............................................................................3

Part C IMPLEMENTATION..........................................................................13

5. Implementation Requirements ........................................................13

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PART A OVERVIEW

1. Introduction

1.1 In an increasingly competitive and fast-paced environment, appropriate and

easily accessible information provides critical support to financial institutions
in the decision making process and day-to-day operations. In this regard, a
framework to manage data and disseminate information throughout an
organisation effectively and efficiently provides a strong foundation for well-
run financial institutions. Principally, such a framework should support a high
level of assurance regarding data quality that would facilitate data mining,
analysis and reporting by financial institutions for the purposes of risk
management and conduct of significant business activities.

1.2 Bank Negara Malaysia expects financial institutions to establish and maintain
a sound data management and management information system (MIS)
framework. Senior management, with appropriate oversight by the board,
must play a key role in the development of the framework to ensure the
proper allocation of resources, effective planning and coordination across the
organisation and alignment to the organisational strategic objectives, and a
corporate culture that reinforces the importance of data integrity. Of
importance, considerations around r esources, technology and infrastructure
issues need to be addressed in the context of the organisation’s overall
corporate objectives and the evolution of its business model over time.

1.3 The Guidelines on Data Management and Management Information System

(the Guidelines) sets out high level guiding principles on sound data
management and MIS practices that financial institutions should observe
when developing internal data management capabilities. Financial institutions
should structure and implement data and management information systems in
a manner that is consistent with the principles set out in the Guidelines and
appropriate to each institution’s specific business needs.
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2. Applicability

2.1 These guidelines are applicable to all institutions licensed under the Banking
and Financial Institutions Act 1989 (BAFIA), Islamic Banking Act 1983 (IBA),
Insurance Act 1996 (IA) and Takaful Act 1984 (TA), hereinafter referred to as
“financial institutions”. Other institutions which are part of a financial group are
also encouraged to adopt the principles contained in these guidelines, where
appropriate.

2.2 These guidelines should be read together with other specific risk guidelines
as well as other relevant guidelines or circulars issued by the Bank.

3. Legal Provision

3.1 These guidelines are issued pursuant to section 126 of the BAFIA, Section
53A of the IBA, Section 201 of the IA and Section 69 of the TA.
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PART B SOUND DATA MANAGEMENT AND MIS PRACTICES

4. Guiding Principles

Principle 1: Financial institutions should develop and implement an effective

data management and MIS framework that is aligned with the institution’s
business and risk strategies. The roles of the board and senior management in
relation to the oversight, design and operationalisation of the framework
should be clearly defined.

4.1 A data management and MIS framework defines the operating framework for
meeting a financial institution’s data and MIS requirements to support its
strategic, operational and risk management functions. I t should s et out
policies, systems and procedures relating to:

(i) data governance (refer Principle 2);

(ii) data architecture (refer Principle 3); and
(iii) internal controls and reviews (refer Principles 4 and 5).

4.2 The board must maintain effective oversight over the data management and
MIS framework and ensure that the framework is aligned with the business
and risk strategies of the institution. This includes providing direction to senior
management on broad expectations of the framework in supporting strategic
and operational decision-making. These expectations should be documented
in formal policy statements on data management and should address the
institution’s organisational needs in terms of acceptable system performance
levels, operational reliability, data quality, security and transparency of data
management processes. The board is also responsible to ensure that
expectations are met on a continuing basis and approve strategic resource
allocations towards data management and MIS enhancement initiatives.

4.3 Senior management has operational responsibility for the design of the data
management and MIS framework. Senior management should advise the
board on the key features of the framework and any subsequent changes
made thereto in a timely manner. In certain situations, the board may consider
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it appropriate to require senior management to obtain its specific approval

(either directly or through a board-delegated committee) of key features of the
framework prior to implementation. This is relevant where the features have
significant or wider implications for the institution’s internal decision-making
processes, timeliness and controls of information flows, privacy policies, and
interfaces within and outside the organisation.

4.4 Senior management should periodically review and advise the board on the
effectiveness of the data management and MIS framework. Such reviews
should serve to ensure that the framework remains responsive to changes in
business activities and processes, and is able to support expanding needs of
risk management and business functions over time. This includes ensuring
the scalability of system infrastructure and processes to accommodate
developments (such as business acquisitions) that have major data
implications, the introduction of new financial products and services, and
changes in the regulatory environment. The framework, including the
technology employed, should be able to support new data requirements i n
these situations economically and effectively.

4.5 The data management and MIS framework and governance structure should
be subject to independent reviews by an external party or the internal audit
function. Such reviews should provide senior management and the board with
an overall assessment of:

(i) the adequacy of data management and MIS framework in relation to

the nature, complexity and scale of t h e financial institution’s
operations;
(ii) appropriateness of data standards and adequacy of policies and
procedures established to meet those standards1;

1
Where appropriate, the external party or internal auditor should:-
- participate as observers in data cleansing exercises to further enhance the integrity of the
process; and
- assess the quality of data (e.g. completeness and accuracy) to ensure that it is preserved
throughout the end-to-end processes.
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(iii) the risks inherent in the institution’s data management and MIS
environment and effectiveness of controls in place to mitigate those
risks; and
(iv) whether adherence to established policies, procedures and controls
has been effectively maintained.

Principle 2: Financial institutions should establish a sound data governance

structure that ensures the effective control of data quality.

4.6 Data governance refers to the overall management of the availability,

usability, reliability, integrity and security of the data employed in an
organisation.

4.7 Senior management should establish appropriate governance structures that

support a clear accountability framework for the effective implementation of
the financial institution’s data management policies and standards. The
governance structures must be well integrated across business units, and
between business units and the IT functions.

4.8 Functions responsible for data management must have a formal status at
senior management level within the institution with the appropriate authority to
implement approved data management policies and standards i n t h e
organisation. The specific responsibilities associated with data management
should be clearly defined, and should generally include:
(i) identifying the institution’s data needs on an ongoing basis. This includes taking
proactive steps to anticipate changing data needs in the light of organisational or
external developments, thereby pre-empting business disruptions due to inadequate
data support;
(ii) ensuring that the institution’s data needs are effectively incorporated in documented
data policies and procedures for the creation, capture, maintenance, reporting,
distribution and retention of data;
(iii) translating data quality expectations set by the board into specific goals for
significant data systems and owners, and defining the metrics for measuring data
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quality with respect to its accuracy, completeness, consistency and currency (i.e. up-
to-date for the intended purpose);
(iv) ensuring that data control functions are operating effectively to preserve the integrity
of the institution’s data, including financial information reported to the Bank. This
includes ensuring that adequate controls are in place to safeguard the security of the
institution’s data repositories and the transmission of confidential and mission critical
data. The controls should also specifically address procedures to be observed for
the deletion/destruction of logical or physical data;
(v) monitoring trends (e.g. increasing frequency of data inconsistencies or data security
breaches) which may be symptomatic o f fundamental weaknesses within the data
systems and controls or indicative of heightened risks of larger system failures;
conducting regular reviews and assessments of the overall operation of the data
management and MIS framework; and recommending enhancements or corrective
measures to senior management to address gaps and deficiencies in the framework;
and
(vi) providing continuous development support, including training, updated user
guidelines or manuals, and technical support to users to ensure smooth business
operations.

4.9 For larger and more complex institutions, consideration may be given to the
establishment of a dedicated data stewardship function which reports to and
supports senior management in discharging its responsibilities for effective
data management as outlined in paragraph 4.8. Such a function should
interact closely with relevant line functions. In other cases, financial
institutions may identify existing roles within the organisation to discharge
these responsibilities.

4.10 Policies and procedures, including the appropriate approving authority, for
effecting changes to data systems should be clearly defined. The policies and
procedures should appropriately reflect the significance of specific data
systems to critical business functions, with more rigorous controls entrenched
for mission-critical systems.

4.11 The deployment of alternative systems w h i c h are not aligned to the

institution’s approved data architecture (see Principle 3) should be subject to
specific authorisation at an appropriate senior management level. A technical
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assessment by a suitably skilled and objective party should be considered to

fully understand the risks to the institution associated with the deployment of
such systems.

4.12 Where data i s managed by third party vendors under outsourcing

arrangements, senior management must ensure that effective oversight,
review and reporting arrangements are established to ensure that service
level agreements regarding standards on data quality, integrity and
accessibility are observed at all times.

Principle 3: A financial institution’s data management and MIS framework

should be supported by a comprehensive data and systems architecture that
is appropriate to the scale and complexity of the institution’s operations.

4.13 The data and systems architecture defines how data is captured, processed,
stored and utilised within the overall data management and MIS framework.

4.14 A comprehensive data and systems architecture should facilitate the proper
integration of data and systems across the institution and should generally
address the following elements:

(i) standards2, guidelines or common criteria and data definitions3 to be

applied in the development of systems, data repositories and
interfaces, and controls over data flows. Such protocols should be
designed to ensure that common data and MIS systems a r e
implemented consistently, thereby mitigating the increased cost and
risk of fragmented and disconnected flows of data within the
organisation;
(ii) major types and sources of data necessary to support the organisation
and a description of the systems in place to capture such data;

2
E.g. standards applied for fair valuations of collateral and recognition of defaulted loans.
3
E.g. consistent use of codes and formats for common data items such as customer records and
product codes.
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(iii) the database technology employed to support the desired d a t a

architecture (see paragraph 4.15 below);
(iv) administrative structures and protocols for processing and
disseminating data throughout the organisation, having regard, among
other things, to the organisational objectives, volume of data handled,
reporting and management information needs;
(v) processes and systems for data repository management. The
institution should consider relevant legal and regulatory requirements,
privacy protection policies or standards, and the need to retain
sufficiently detailed information for a defined period to support the
institution’s internal models and processes used for analysis and
decision making; and
(vi) appropriate data storage and back-up processes that optimise the
functioning of data systems and enable efficient and timely access to
data for the purpose of business continuity management.

4.15 Financial institutions should ensure that the technology employed for its data
systems is capable of transmitting and integrating data across multiple
platforms and systems in an efficient manner. This should include the ability
to link and aggregate common data records (e.g. specific customer,
counterparty, investment rating or product) residing in multiple sources a s
needed to support the business and risk management functions. In addition,
the technology should also allow for the efficient integration between internally
developed and external software applications.

Principle 4: Financial institutions should maintain adequate data quality at all

times. Data quality should be assessed and monitored against the institution’s
data policy statements and objectives on an ongoing basis.

4.16 Measures and controls put in place by financial institutions should ensure that
data generated is accurate, complete, current (i.e. up-to-date for the intended
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purpose)4, consistent across systems and the organisation, and supported by

clear and unambiguous data descriptions. Senior management, or the data
stewardship function where one exists, should define metrics for measuring
data quality. The metrics and target performance standards should reflect the
institution’s desired data objectives as enumerated in the data policy
statements endorsed by the board (see paragraph 4.2).

4.17 Processes should be established to support the effective monitoring of data

quality on an ongoing basis. This may include, among other things:
(i) the conduct of data quality assessments at regular intervals, and whenever material
changes are made to data systems, architecture or processes;
(ii) roles assigned to perform the monitoring functions;
(iii) timely reporting on the outcome of data quality assessments to senior management;
and
(iv) scheduled data quality maintenance activities to enable defects and deteriorations in
data quality to be detected and rectified promptly. This may include establishing
5 6
routine data cleansing and data validation activities.

4.18 Any systematic deterioration observed in data quality should be fully

investigated by senior management. The observations, findings and remedial
actions proposed and taken to restore data quality should be reported to the
board. The report to the board should provide an assessment of the nature
and extent of risks posed to the institution from such a deterioration, how
these risks are being managed, and the prospects and time needed to restore
data quality to the desired level. The board should promptly inform the Bank
of any developments that may have a material bearing on the institution’s
operations, risk profile or financial condition.

4
E.g. borrower financial details
5
Data cleansing refers to the process of detecting, removing and/or correcting data that is incorrect,
out-of-date, redundant, incomplete or formatted incorrectly from the database.
6
Data validation refers to the process of ensuring that a program uses data that is accurate, complete
or meets the specified criteria.
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Principle 5: Financial institutions should maintain effective controls over data

security and privacy to preserve a high level of systems and data integrity.

4.19 Systems and data integrity refers to the reliability of information processed,
stored or transmitted both within the institution, and between the institution
and its customers or other third parties.

4.20 Financial institutions must establish adequate preventive and detective

controls to ensure that logical and physical access to systems and data is
secure and only available to authorised personnel for specific purposes.

4.21 The controls should be commensurate with the criticality and sensitivity of the
relevant systems and data handled. In this connection, policies and
procedures should be established for the classification of data, having regard
to t h e potential impact that unauthorised access to, or tampering of, data
could have on the institution’s ability to accurately assess its risk exposures
and financial condition, plan and manage its financial resources, preserve
individual (including customers’) rights to privacy, maintain the institution’s
competitive position, and fulfill its regulatory reporting obligations.

4.22 Similarly, financial institutions should identify critical data systems, generally
defined as those systems that, if disrupted or tampered with, would materially
impact the institution’s business operations, reputation or financial condition.
More rigorous controls should be in place for access to data and systems
classified as highly sensitive or critical.

4.23 Access rights to systems and data should be clearly defined, documented and
where appropriate, segregated to prevent critical data or systems from being
compromised. Given the sensitivity of the bulk of data handled by financial
institutions, access should generally be given on a “need to know” basis.

4.24 Employees should not have concurrent access to data files residing in and
computer facilities supporting both the production systems and backup
systems. Persons given access to backup files or system recovery resources
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should be limited and duly authorised to have access for specific purposes
and a specified period only. Any access should be documented and logged
for audit purposes.

4.25 Access to critical data or systems by external parties (e.g system vendors and
service providers) must be properly authorised. Financial institutions must
ensure that such access by external parties is closely supervised, monitored
and appropriately restricted in line with the purpose of the access given. Legal
agreements for services contracted should clearly prohibit the unauthorized
disclosure of confidential data by the external party and provide for adequate
remedies to the financial institution.

4.26 Financial institutions are generally expected to limit manual data

manipulations or changes in the institution’s day-to-day operations to a
minimum level. Where manual intervention is required (e.g. for the purpose of
data patching7), the interventions should be properly authorized and a
historical log maintained for audit purposes.

4.27 Appropriate safeguards should be put in place to ensure that personal data is
not misused or disclosed in a wrongful manner. Personal information (of
customers, employees or any other parties that the financial institution may
conduct business with) should be handled properly to ensure confidentiality of
the information and compliance with relevant legislation.

4.28 To ensure that safeguards and security measures implemented over data and
IT systems are effective, financial institutions are encouraged to obtain the
MS ISO/IEC 27001:2007 Information Security Management Systems (ISMS)
certification for critical systems, particularly the payment and settlement
systems.

7
Data patching refers to the process of updating software by comparing the different versions of a
software and extracting the differences (e.g. security or features update) between the files. Patching
can be done manually on each computer or through an automated system.
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Principle 6: The operation of MIS functions should be effective and robust to

enable timely access to critical data for decision-making, analysis and control
purposes.

4.29 The MIS functions and processes must be capable of providing and
disseminating up-to-date information to a wide range of users identified as
requiring access to data for decision making, analysis or to support the
institution’s various control, including risk management functions.

4.30 The MIS should be capable of efficiently and effectively transforming data that
is tailored to the needs of various users of information within the organisation.
Information produced by MIS systems should fulfil the institution’s data quality
standards, and effectively address specified information needs in terms of its
relevance, timeliness and granularity to specific user groups. To achieve this,
user requirements should be clearly defined at the outset of the system
development stage, and regularly reviewed thereafter to inform subsequent
system enhancements.
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PART C IMPLEMENTATION

5. Implementation Requirements

5.1 The board is responsible to ensure that the principles in these Guidelines are
observed on an on-going basis in line with the level of sophistication and the
needs of the institution, and any deficiencies in the institution’s data
management and MIS practices are addressed within a reasonable period to
be determined by the board.