Spreadsheets Risk the Future of the Business

Spreadsheets often start as just a list for storing information and there is minimal process documentation, support or maintenance for these worksheets. Despite the fact that desktop applications such as Microsoft Office are included in the standard configuration of users' PCs, very little formal training is ever given to spreadsheet users. Meaning that organisations only find out there is a problem with them when something goes wrong.

Spreadsheets can also be vulnerable  

The vulnerability of spreadsheets has been well documented over the years, The European Spreadsheet Risks Interest Group (Eusprig), an independent organisation, publishes on its website examples of disasters and mishaps originating from spreadsheets. Spreadsheets can be easily edited, may lack internal control measures and are vulnerable to user error.

Examples of errors include:

In 2016 Lazard Ltd, the investment bank that advised SolarCity Corp, on its $2.6 billion sale to Tesla Motors, made an error in its analysis that discounted the value of the solar energy company by $400 million. The error was the result of a computational error in SolarCity spreadsheets which it used in its discounted cash flow valuation analysis. The error meant severe reputational risk for the companies advisers.

The high street retailer M&S fell victim in 2016, to a spreadsheet summing error which forced the retailer to issue a correction to its quarterly trading statement. The original statement issued at 7 am reported group sales had grown 1.3%. But later the same day the company reissued the financials with a correction showing that group sales had in fact fallen 0.4%. The error resulted in reputational risk and restatement.

Future risks with spreadsheets

Spreadsheets start with a few formulas but grow and end up being core documents which support business-critical decisions. As the company grows the worksheets become more complex and harder to manage, by which point it feels like it will be too difficult to move to a different reporting tool so the business sticks with the risky spreadsheet. From human error to complex equations, formulas and macros, spreadsheets add risk to a companies reporting efforts and should be replaced by tools that prevent employees from cutting and pasting critical information incorrectly, encourage collaboration and aligned with current business security protocol.

Keep your company safe

Finance Managers, CFO’s and Directors are responsible for these mistakes and are also in charge of driving the adoption of more suitable IT solutions for reporting. If you would like to find out more on how to keep your organisation safe from spreadsheet risks get a complimentary copy of Mercur’s e-book about the six critical risks of reporting in spreadsheets and how to stop them.

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