Spreadsheets put everyone at risk

29th June 2021

The Covid-19 pandemic has brought about an increased awareness of the benefits of using software that enables organisations to orchestrate and manage their operations. The persistent use of spreadsheets however continues to present untold risk and could lead to both financial losses and damage to a company's reputation. “We at RSPH are here to help you prevent these disastrous occurrences by walking the path with you to implementing the best globally proven, fit-for-purpose systems to support your businesses goals”, Dilley Naidoo, Director RSPH.

Some big-name companies that have been subject to spreadsheet errors and the consequences:

$6 billion in trading losses – J.P. Morgan Chase incurred $6 billion in trading losses due to a spreadsheet error that led the company to misstate Value at Risk (VaR) presented by their model’s trades.  This error did serious damage to J.P. Morgan’s brand, and its bank account.

$2.45 billion loss – A spreadsheet error cost Fidelity Magellan Fund $2.45 billion - all due to the simple omission of a minus sign in the spreadsheet.

$1.136 billion error – Annie Mae discovered a $1.136 billion error in total shareholder equity.1 The Senior Vice President for investor relations had this to say, “There were honest mistakes made in a spreadsheet used in the implementation of a new accounting standard.

$24 million loss – A cut and paste error cost TransAlta $24 million. This caused the Canadian power generator to buy more US power-transmission hedging contracts at much higher prices than it would normally have had to do.

The 'SAtion' (Digital SA Nation) initiative should provide further impetus in moving away from the use of spreadsheets:

 "It is imperative that the country reorganises itself to ensure that all citizens are positioned to benefit from the opportunities presented in the digital economy. We, as a country, all need to unite to sow the vision into reality, transforming the economy that will enable SA to thrive in the Fourth Industrial Revolution and achieve financial stability. Let us build and realise South Africa’s digital vision now, together!" - President Cyril Ramaphosa.

There are at least five good reasons organisations should stay away from spreadsheets and utilise an integrated software solution to handle their operations and risk management.

Reason #1:  Risk of Inaccuracies

Manual error

Manual processes are inevitably going to introduce errors, which can be propagated as the data stream moves through multiple departments.

Spreadsheets lack the controls and approvals that would help detect these errors earlier in the transaction life cycle.

Version control and breaking down silos

Spreadsheets don’t easily support collaboration between various departments, and it’s difficult to ensure that every member of the company is working with the latest data.

Without a central repository larger companies can end up with hundreds of spreadsheets circulating at any given time, with multiple versions being used, because individuals like to see data differently.

Reason #2:  Risk to shareholder value

An audit nightmare

Spreadsheets are impossible to audit and lack the controls a company needs to adhere to internal and governmental policies. Without the ability to ensure business process efficiency and provide all necessary documentation of activities, organisations face costly risks around financial transactions, exposure, contracts, cash flow, and compliance.

Meeting regulatory requirements

With today’s increasingly stringent regulatory reporting requirements, companies need accurate, timely documentation of all activities. Generating reports from spreadsheets can be difficult, time-consuming and error-prone, and you’ll have limited visibility into your portfolio and associated risk.

Reason #3:  Risks to productivity

Spreadsheets are time-consuming and unwieldy

Capturing and managing transactions, activities and risk management data in spreadsheets can consume an inordinate amount of an organisation’s time.

Spreadsheets lack the automation of data entry and can lead to redundant efforts. Often, by the time data is compiled, reviewed and sent to executives, the information is no longer current, and far from ideal for accurate decision making.

Spreadsheets can't scale

Spreadsheets won’t support a company looking to scale - either in volume of transactions or entrance into new markets or territories. They simply don’t have the ability to capture and maintain the enormous amount of data that a large operation demands. This limits transparency, impacting decision-making ability.

Reason #4:  Risk of decision profitability

Spreadsheets don’t ensure you get the most out of your decisions

Improving market insight, can be achieved by replacing spreadsheets with business process management and risk management software solutions.

An integrated software platform links the activities for all disciplines. Management can then make the most profitable decisions with the best available information. Risk managers can aggressively work to mitigate risk, and executives can evaluate which parts of the business are thriving or struggling.

Reason #5:  Risk of losing proprietary analytics knowledge

Analysts may control your spreadsheets, but what if they leave your company?

The risk of one owner

Analysts have proprietary knowledge about the way your organisation makes decisions and utilises analytics. They create formulas that are essential to the way your business runs. If an analyst leaves your organisation, they take the knowledge of their formulas and spreadsheets with them, and this makes it almost impossible for your organisation to retain proprietary knowledge and grow your company.

“If you are ready to take action, supported by expert Resultants TM, book an introductory session with us today”, by emailing Caroline.Carter@rsph.co.za


Rifle-Shot Performance Holdings