In Digital Banking, Spreadsheets Remain a Go-to Tool (and a Risk)
Few industries have been subject to so much change, so fast, as banking in the last 20 years. Banks have been at the forefront of adopting digital processes to drive their business forward.
Going digital has helped create new products, create new routes to market, and delivered new efficiency savings. These powerful digital capabilities have allowed them to scale up their services, build their business and support the broader economy.
With these powerful and secure digital tools to hand, one would think that senior managers, analysts, and risk managers would be making decisions and executing them with the simple swipe of a finger on their smartphone.
That be the reality for a small minority. The reality for most people working in banking and financial services is less glamourous if the picture painted in a recent article published in The Banker is accurate.
Rather than a world of seamlessly integrated data lakes, AI-based decision support tools, and automated workflows, the reality is more prosaic. Instead, many working in banking services reach regularly for the Excel spreadsheet, a tool that first appeared 40 years ago, to solve business problems. Employees typically use Excel when creating End User Computing (EUC) applications – business applications created by users rather than the corporate IT function.
To illustrate its point, the article references industry research that highlights that 80% of treasury forecasting processes in banking use Excel in one form or another. Treasury forecasting is a key element in managing liquidity in banks and is essential in maintaining market confidence and profitability. And banks continue to use Excel to deliver it.
In fairness to banks, the use of Excel reflects how many of those digital processes – while delivering significant business agility – are simply not agile enough. Getting application changes planned, developed, tested, and approved by the corporate IT function can take too long. Spreadsheets, in contrast, are flexible, deployed on every laptop and desktop in the business, with skills widely available to get results fast.
But this flexibility comes at a cost.
The challenges of using spreadsheets
Spreadsheets lack the controls typically found in corporate IT applications that assure the transparency and auditability of change management. Unmonitored changes can give rise to errors and omissions that can create significant, regulatory, and reputational risks.
Regulators are alive to these risks, with greater scrutiny of EUC risk moving up the regulatory agenda. Spreadsheets are increasingly expected to benefit from the same controls typically found enterprise applications.
What steps will regulators expect institutions to put in place in managing their critical spreadsheet estates?
Spreadsheets lack the controls typically found in corporate IT applications that assure the transparency and auditability of change management.
How to manage your spreadsheets
The first step is to create a centralized inventory. This will provide the foundation for managing the critical spreadsheets in mission-critical processes. This capability allows managers to proactively monitor spreadsheet risk policy, as well as provide a document repository that helps the document management process that regulators expect to see.
The next phase is discovery, where the mission-critical spreadsheets are identified from the vast spreadsheet estate found in any financial institution. These need to encompass spreadsheets found on PCs and laptops and file shares, SharePoint environments, and cloud computing environments. The links to these spreadsheets also need to be captured, whether it be to other spreadsheets or other data sources, both upstream and downstream.
The last phase is to implement a proactive management capability. This highlights issues around missing data, errors, and broken links, so they can be captured before they have a material impact on the business. This capability also allows for changes to be monitored by user and approver, so that there is an audit trail to assure the transparency institutions are expected to provide.
Mitratech offers a proven and robust spreadsheet risk management solution in use with some of the most demanding financial institutions in the world. It is easy to deploy and offers enhanced management control of EUCs fast.