Spreadsheet Risk: Three Steps to Avoid Disaster

Have you considered the impact a broken spreadsheet could have on your organization? It could mean a huge financial loss and potential disaster if not caught in time. Spreadsheet risk is a critical issue for many businesses, with many never realizing it.

What is spreadsheet risk?

Datasheets are integral to the everyday business processes of so many organizations, yet when auditing datasheets, they are seldom clean of errors. This means incorrect figures that companies are basing their decisions on.

Spreadsheets are used for a wide range of applications and they are increasing in complexity all of the time. As more and more companies become more proficient in IT, the role that spreadsheets play in operational and financial reporting has become greater. Despite this increasing role in work processes, few actually know who manages and monitors these spreadsheets in their organization.

Without a coherent strategy to manage the data and sheets, there is significant risk to businesses. As time has gone on IT programs have developed hugely, yet even with these increasingly sophisticated systems, spreadsheets are still susceptible to human errors. Second to this, if the data is without an internal controlling system, there is a real danger because the figures can easily be manipulated and changed.

Types of spreadsheet error

Essentially, there are three main areas that spreadsheets gain errors:

• Inputted data
• Formulas and calculations
• Formatting

These errors are the start of risk for the business. The more errors that take place, the amount of risk to the organization increases. Understanding where the potential dangers come from, you can begin to predict what places an organizations spreadsheets at risk. The most common ones are:

• Unskilled users – Overestimation in a user’s ability to create and manage data can lead to inaccurate computations and wrong formulas, amongst others.
• Lack of clear guidance for spreadsheet creation – Businesses need to provide clear guidance for creating spreadsheets to match their particular needs. It’s vital for making sure they work within the wider business strategy as well.
• Data recycling – Formulas and links can be damaged and changed by the simple action of cutting and pasting data from one place to the next. An easy mistake to make that doesn’t save time at all in the long run.
• Spreadsheet errors – People make mistakes. No matter how accurate or good at their job they are, eventually mistakes do happen.
• Data loss – Power outages, breakdowns and machine failures can all cause data to be wiped.

Why improve your spreadsheet risk management?

It may seem apparent, but minimizing the risk to your organization, particularly a heavily data centric one, is paramount to long term success and security.

Spreadsheet risk management is a vital discipline to any workplace. Undetected flaws in spreadsheets can impact management and shareholder reporting as well as key business processes. Furthermore, incorrectly reporting on figures, whether financial or other, can cause serious regulatory, audit and reputational issues.  The questions to ponder are:

• Do you use uncontrolled spreadsheets in your critical business processes?
• Are your external auditors looking more closely at how you manage your spreadsheet data governance?
• Have you experienced a business disruption caused by errors in spreadsheets?

Watch our guide below to learn a three-step approach to managing spreadsheet risk in your business.