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 The
Issue with Spreadsheet Risks
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It
has become apparent that businesses are relying increasingly on end-user
computing, and spreadsheets in particular, to make business decisions.
The glut of information and the existence of a multitude of options, types
of financing and complex financing arrangements has meant that businesses
have needed to analyze more scenarios to reach a decision.
To make matters worse this needs to be done in less
time than ever before. |
The advent of personal computers and spreadsheets has catered for this
need and has meant that various complex scenarios can be analyzed within
minutes.
It may be fair to say that some spreadsheet models are more important
to the business than the systems that effectively only record the results
of the decisions previously made.
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The research
results and War Stories indicate that there
are significant risks and it would appear that the risks surrounding the
use of spreadsheets has been ignored. When considering the risks of spreadsheet problems you should consider
2 aspects. The primary question is the impact an error will have on your
organisation should it occur. The other aspect is the probability of an
error occurring in your organisation. Below is a breakdown of the two aspects
of spreadsheet problems and errors.
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Spreadsheet
Problems
When considering the risk of spreadsheets you should consider two
aspects |
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Considering:
Time spent on upfront planning, Skills of the developer/s,
Time Constraints, Understanding the business issues, Effects
of last minute changes
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Resulting in:
Loss of money, Regulatory issues, reputation
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Comments and Recommendations |
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Research has shown
that the majority of spreadsheets contain some form of error.
Recommendation
- Ensure adequate knowledge by ensuring that staff are trained
- Utilise Excel's inbuilt auditing tools and Spreadsheet
Professional in the development process to reduce the element
of errors.
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The impact of
a spreadsheet problem can range from a minor effect to a devastating effect.
What is crucial to understand is that there is no way of anticipating
the impact without a review.
Recommendation:
Set value limits to decide the extent of the review required
to ensure that the appropriate software tools are used. An
example could be:
- < R1million: Self review
- R 1 million - R50 million: Independent internal review
- > R 50 million: Independent external review
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Free Excel training available on
the TRAINING
pages! |
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