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Breaking free from spreadsheet risks: enhancing operational resilience

Independent Consultant Stephen Huppert explores the inherent risks in using spreadsheets to manage investment data, and how to mitigate them.
 
Spreadsheet risk remains a significant concern in the investment management industry. Numerous articles cite alarming statistics, such as “90% of spreadsheets have errors”. Most refer directly or indirectly to Ray Panko’s seminal work What We Know About Spreadsheet Errors , which revealed that 88% of spreadsheets have 1% or more formula errors. 
 
Regardless of the exact percentage of spreadsheets with formula errors in your investment management business—whether it’s 88%, 50%, or even 5%—the fact remains that the number is not zero. As this article will demonstrate, spreadsheet risk extends far beyond mere formula errors. 
 
 
Read our white paper 'Spreadsheet risk: The closing bell' to explore the risks associated with managing investment data on spreadsheets and how you mitigate them effectively, enabling better investment decisions and outcomes.

Are most organisations managing their spreadsheet risks effectively? 

Here are some newspaper headlines that might make you think twice about thinking that spreadsheet risk is a thing of the past: 
 
 

Evaluate spreadsheet use to manage risk 

Analysis of the headlines above reveals that only two relate to the usual understanding of spreadsheet risk—formula error. The other three relate to spreadsheet misuse. While you might have controls to manage formula error risk, do you have controls for other spreadsheet risks? 

Investment management organisations are increasingly focusing on information and cyber security. Using spreadsheets may increase those risks (as it did for the superannuation fund mentioned above). In January 2024, US Homeland Security warned US federal agencies of hackers targeting Google Chrome and Excel Spreadsheets . 
 
 

Advance your data management maturity 

AlphaCert has created a Data Management Maturity Model to help investment management organisations prioritise where to invest the time, money, and energy so that data management best supports the organisation’s objectives.  
 
A couple of indicators that an organisation is at Level 1 of the Maturity Model are:  
  • Having a proliferation of spreadsheets along with manual processes and reports. 
  • Data exchange, storage, and archiving take place mainly over email. 
 
An essential first step in improving data management maturity is implementing rules around spreadsheet use and conducting an inventory of how your team utilises spreadsheets.  This assessment enables you to quantify spreadsheet risk and identify which spreadsheets should be replaced with a more robust tool.  Begin by evaluating spreadsheets used to manage investment data.  
 
When the Williams team boss learned about using Excel to manage its car parts, he apparently said it’s “impossible to navigate and impossible to update.” He could have been talking about how some organisations manage their investment data! 
 
While Excel has a place in your investment management business, it has a tendency to be used for tasks it’s not well-suited for. 
 
Read our white paper Spreadsheet risk: the closing bell? or contact us to learn how AlphaCert can help you improve the operational resilience of your investment management business. 
 

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Spreadsheet risk

Spreadsheet risk: closing the bell?

Spreadsheets are the tools of trade in any investment entity, but the risks of using them combined with data from disparate systems are becoming increasingly apparent.
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