A Spreadsheet Crisis

Guest Contributor: James Wells, Marketing Communications Manager, Imagine Software

Amidst the tension of the Cuban Missile Crisis, President Kennedy said, “There are risks and costs to a program of action, but they are far less than the long range risks of comfortable inaction.”  With so much of the world’s financial system dependent on these programs, the current spreadsheet crisis offers a scenario that is only slightly less frightening.

According to a recent study conducted by TABB Group, 84% of participating capital markets organizations in North America use spreadsheets for some form of modeling, with 37% of respondents operating more than 1,000 “business critical” spreadsheets within their organizations. The survey also found that spreadsheets are widely used to manage trade data (48%), risk (42%), positions (42%), and compliance (40%).

This ubiquity would not be so troublesome if it were not for the application’s potentially dangerous shortcomings.  While there have been a number of studies examining the error rates associated with spreadsheets, all with different conclusions about the average frequency of errors, only one thing is certain: when you combine a lack of built-in data validation, little or no formal QA testing, and the unavoidable violation of one of the oldest rules of programming—don’t mix data and program code together—you’re going to have problems.  By far, the biggest challenges by financial professionals are (i) Operational Risk Concerns; (ii) Functionality, Performance and Data Management; and (iii) Transparency and Investor Confidence.

This issue will be discussed at a complimentary webinar tomorrow: “Three Reasons Why Investors Want You Off Spreadsheets.”

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