In 2020, as more and more organisations recognize the risks posed by a lack of spreadsheet management, they will turn to automated controls to mitigate those risks. Two of the primary benefits they’ll realise? They will gain visibility into, and control over, these spreadsheets, and also gain cost savings; we estimate savings of no less than $500K per annum for 100 operational spreadsheets, thanks to the operational efficiencies inherent in these new tools.
Some estimate that 90% of spreadsheets contain errors. While internal audit, compliance, and risk management professionals recognise the risks presented by spreadsheet applications, very few organisations are systematically enforcing a manual control policy of any kind, and even fewer have actually instituted automated controls to mitigate these risks.
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Yet on average, these corporate professionals are spending a huge amount of time monitoring and validating data on spreadsheets. Without the labor-saving benefits of automated spreadsheet management solutions, the burden of ensuring the accuracy of spreadsheet data falls entirely on these professionals, and it’s a process that is also entirely manual. Even with the most scrupulous attention, human error will insert itself into even the most rigorous checking process.
Spreadsheets as a source of risk
Spreadsheet errors may be single errors, such as a mistake in data entry, or they may become repetitive, even endemic errors repeated across the entire unit or organisation. Some of the causes?
Oh-so-human error: We are all mortal and prone to distraction, to putting out the newest fire, or needing to take a break These are the moments when errors creep in, regardless of our best intentions.
Inadequate training and guidelines: Spreadsheet use should be preceded by spreadsheet training, including written rules which clearly instruct the user in how to prepare the document.
User skill levels: Related the the previous point; basic competency in Excel is insufficient for auditing more complex spreadsheets and formulae, and can lead to a host of mistakes. Often, however, an employee will proceed without proper training, either because the company has not mandated s/he receives it or because s/he doesn’t realize their skills aren’t equal to the task.
Cutting-and-pasting of data: It may save time, but in the end it can be costly to cut-and-paste data between spreadsheets. Over time, data and formulas accrete errors and links become broken.
In a manual spreadsheet management environment, these issues are bound to recur over and over again, despite our best efforts.
Diminishing returns from manual validation
A related issue? The diminishing value of spreadsheets to the enterprise because of these outmoded approaches.
Due to the fact there are a vast number of business-critical processes being undertaken using poorly controlled spreadsheets, the value of those spreadsheets to users declines. Why? Their advantages – flexibility, agility, efficiency and productivity – are reduced or even negated by the time and expense involved in managing them manually. Moreover, they present a daunting level of risk: Some of the most costly mistakes in financial history, such as the notorious JPMorgan “London Whale” fiasco, were due to spreadsheet errors.
Paradoxically, the use of spreadsheets in business-critical processes keeps growing, as they are still a valuable tool for specific processes and tasks. They’re familiar and, to be quite frank, favored by many users over corporate financial systems, whose use may be the enterprise’s stated preference but still fall short of user preferences.
Spreadsheets are extensively deployed in financial environments for complex modeling and calculations, particularly because of their flexibility to a user’s particular needs. “Spreadsheet addiction” is a bit of an old joke in the business world, but we will probably not wean ourselves off them any time soon, even if they’re a key contributor to risk.
The many merits of automating spreadsheet management
As with so many things, the matter comes back to control. As in, the lack of control and monitoring for spreadsheet applications is why spreadsheet-related risk is a weed that can be impossible to eradicate using previous approaches.
By using automated solutions to manage financial and compliance processes within the spreadsheet environment, organisations can mitigate the risk of losses, reputational damage, and compliance-related fines and penalties. At the same time, automation of spreadsheet management delivers benefits familiar to others who have employed process automation in their disciplines or departments: optimization of efficiency and productivity, tangible financial savings, and even an uptick in morale as managers and employees are freed from the drudgework of manual validation.
One simplistic scenario that demonstrates this? Imagine 100 operational spreadsheets exist within a company, with eight hours per month spent on each by an employee paid $50 an hour. Each spreadsheet costs the company $400 per month in labor, or $4,800 per annum. Yet there are 100 spreadsheets demanding an equal amount of work, so the total comes to $480,000 a year. Yet there’s still absolutely no guarantee a ruinous error won’t sneak past people’s scrutiny.
Automation eliminates this cost by introducing a managed, controlled, yet agile and flexible spreadsheet environment to ensure that each spreadsheet can be managed like any other IT application. They can be monitored and supported across its entire lifecycle, from the moment it’s created to the day it’s decommissioned and its functions are added to your core enterprise systems. Automated systems can not only detect errors and even evaluate the risk they pose to your operations, but some can locate and inventory the hidden End User Computing (EUC) spreadsheets and applications outside of IT’s direct control.
As compliance demands and competitive challenges become more complex, automating spreadsheet management becomes less an option and more a mandate. Fortunately, the benefits are plain, and will show up in the most important place: On the corporate bottom line.
Henry Umney is SVP Commercial at Mitratech and joined Mitratech as part of the ClusterSeven acquisition in 2020. Henry joined ClusterSeven in 2006 and for over 10 years was responsible for the commercial operations of ClusterSeven, overseeing globally all Sales and Client activity as well as Partner engagements before being appointed CEO. Henry has over 30 years of experience and expertise from the financial service and technology sectors and prior to ClusterSeven, he held the position of sales director in Microgen, London and various sales
management positions in AFA Systems and ICAP, both in the UK and Asia.
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