The effectiveness and efficiency of the business flow and processes between the resource mobilization and repayment teams also benefit from a well-running DMS. As these systems have built-in controls and validation rules, with clear delineation of the roles and responsibilities of staff accessing the system, they can easily support and enhance the workflow and the internal processes of the DMO. We should, however, note that no DMS can replace internal governance issues. If the business processes in the DMO are not sound, even a fully operational and high quality DMS will underperform.

**Table 1: How does a DMS contribute to strengthening debt management operations?**

Supports decision making Reduces operational risk Reduces reputation risk Facilitates efforts to increase transparency and accountability Stimulates efficiency and productivity Source: Authors A DMS can also serve as a _knowledge management system_ that increases the productivity and efficiency of a DMO and contributes to supporting transparency of information by facilitating access to data. A knowledge management system lessens the challenges in maintaining and updating a consolidated debt database and is more reliable than maintaining records on Excel spreadsheets<sup>5</sup> or separate systems (e.g., for external and domestic debt). A DMS that functions according to the rules and processes required in a DMO (for example, front and back office teams with different authorizations to access the system) creates an incentive to improve the operations of the DMO. Moreover, a DMS that has well-functioning application controls such as input, processing and output controls is conducive to reducing vulnerabilities originating from human error and manipulation. For example, the software can reduce the amount of manual input by staff and enhance the reliability and security of information. Moreover, it creates the ability to generate standard and easily customized reports on individual instrument and portfolio levels. These products increase the DMO’s effectiveness by generating inputs for debt bulletins and other analyses. A DMS that can run risk models and serve as a _decision support_ and an _executive decision support system_ further empowers DMOs by enabling staff to focus on these analyses and dedicate less time and effort to operations.

Overall, a well-functioning and reliable DMS can help strengthen debt management operations, reduce operational risk,<sup>6</sup> and improve decision making within a DMO. In the absence of such a system, a DMO cannot increase the volume of its transactions and the complexity of its instruments,

> 5 In the absence of a full-fledged DMS, some countries use spreadsheets (e.g. Excel) as the technology for hosting debt management data. This is a suboptimal solution as it is prone to operational risks and incapable of addressing most of the complexities required in a DMS.

> 6 Operational risk is the “risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events” (Basel II, June 2004). For a DMO, this risk arises when (i) proper workflows within and between the front, middle and back offices are not in place, (ii) there is weak segregation of responsibilities among staff, (iii) staff make mistakes in their daily jobs, (iv) there is no sound DMS, and (v) there is rogue activity such as fraud.

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