10 May SPREADSHEET RISK IS NOT GOING AWAY
Spreadsheets are one of the most useful innovations of the computer age. They are essential for evaluating projects, financial reporting, transferring data between users and a host of other uses.
However, they also have a reputation for errors, which can cause serious problems for the businesses that use them. Examples of large public spreadsheet errors include JP Morgan, Goldman Sachs, the UK Government West Coast Mainline franchise. This is of course the tip of an iceberg as companies want to avoid adverse publicity from these errors.
At Finsbury we have been asking the poll question “Have you experienced a serious spreadsheet error in your organization” every month and on average 70% say yes. (Less than 5% say no with rest as “Don’t knows”). We also know that most restatements involve spreadsheet errors.
This is truly surprising. Most of the responders are major financial institutions or large corporates, who should have the knowledge and resources to tackle this problem. They all have regulatory requirements to require them to have effective controls to prevent this type of error.
It is also clear that spreadsheets themselves are not going away. The IT department cannot keep up with the continuous stream of new requirements, so managers close the gap by building spreadsheets. Most large companies have between 50 and several thousand critical spreadsheets and the spreadsheet count is increasing.
Spreadsheet errors can be reduced to close to zero, with proper training and by following a set of best practices. In this series of articles, we are going to explore spreadsheet risk in more detail and lay out a series of practical steps that can be taken to reduce the risk and improve the efficiency of your business processes.
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