Sometimes saving a dollar could cost you a billion

Sometimes saving a Dollar can cost you a Billion

Spreadsheets run the world. Spreadsheets are being used in everything from complex Oil and Gas operations to basic to-do lists for your home. Let`s take a look at the humble spreadsheet. How did we end up placing so much trust in this seemingly simple tool? 

an iNsight by Christer Bjørnø-Husa

 

  1. 1st Statement: Most of us know spreadsheets and use them for our everyday work. 
    1. True.
  2. 2nd Statement: Most of us know how to use spreadsheet software correctly.
    1. False.
  3. 3rd Statement: All of us understand the risk of using spreadsheets for continuous operational processes.
    1. Blatantly false.

Fact: 1 in 5 adults in the world use Excel (“What’s new in Microsoft Excel”, Sept 2017)

Businesses ranging from enterprise to small/medium size businesses all depend on the spreadsheet. It is used for everything ranging from inventory, customer relations management, sales tracking, forecasting, budgeting, reporting and collecting other spreadsheets into bigger spreadsheets. In short, if we put any money into a part of our business, most likely there will be a spreadsheet connected to it. 

In some instances, this can be a great thing. Less complex processes, demand simple and easy to understand solutions. One-offs and project-based spreadsheets are also a great way of handling limited amounts of data.

88% of all spreadsheets contain errors (Study by Raymond R. Panko published in Journal of End User Computing).

In most larger organizations, however, processes are rarely simple and straightforward. Most of these larger spreadsheets are collaborative and continuous processes across various departments. When you add the notion that 88% of all spreadsheets have mistakes and the insight that the average person won`t catch close to 40% of the mistakes in a spreadsheet (Panko). Alarm bells should be ringing. 

In 2013 JP Morgan suffered a $6 billion trading loss. Why? They had a process that was based on copy and pasting data from one spreadsheet to another (Business Insider: How The London Whale Debacle Is Partly The Result Of An Error Using Excel). 

In fact, there are multiple stories similar to this, but perhaps not as expensive.

There has been legislation put into place in the US to handle these types of situations. Namely the Sarbanes Oxley Act. This act made corporations analyze spreadsheet usage within the financial reporting domain. The findings were not promising. Spreadsheets were shown to be widely. The error analysis revealed that nearly all large spreadsheets included numerous mistakes, even further they found that larger costly errors were not uncommon. (Raymond R. Panko - SPREADSHEETS AND SARBANES–OXLEY: REGULATIONS, RISKS, AND CONTROL FRAMEWORKS 2006

Experience is Key

In our domain with high-frequency environmental data, we see it frequently. We haven`t received an excel spreadsheet from a client yet, where we didn`t identify some type of error. Our experience is that the biggest issues that exist are in the spreadsheets that require domain expertise. As users often inherit spreadsheets from previous staff and they are unsure if they can make any changes. Afraid of generating errors or mistakes that might prove costly. Unfortunately, this often ends up being the case due to mistakes that are continued year after year without being corrected. 

In Norway, even the authorities have experienced excel mistakes.

As environmental experts and software developers, we have made our own fair share of mistakes in spreadsheets. In fact, we have probably done them all at some point. However, our experience has been introduced into our environmental solutions, ensuring that you don`t have to repeat costly mistakes. That is why we like to say we are Compliant By Nature. We ensure that our products are always compliant with laws and physics.

True digital reporting is not uploading a spreadsheet to the cloud. Digital reporting is ensuring data is streamed directly from the source into an integrated database. This reduces the risk of human error and ensures better Quality Assurance and transparency on your continuous reporting.

For more insights into spreadsheet facts look here.

To learn more about how we help our clients click here.

To learn more about how we can help you click here. 

Sometimes saving a Dollar could save you a Billion
Sometimes saving a Dollar could save you a Billion