Spreadsheet Risks in Banks

No other industry perhaps handles such large volumes of critical financial data more than the banking industry. For decades now, spreadsheets have become permanent fixtures in the front-line reporting tool sets of banks, providing organised information when and where needed.

But as banks enter into a period of heightened credit risks, elevated levels of fraud, and greater regulatory scrutiny, many are wondering if continued reliance on spreadsheets is a wise decision for banks today.

The downfall of Lehman Brothers which eventually led to its filing for Chapter 11 bankruptcy protection on September 15, 2008, served as a wake up call for many institutions across the globe to make a serious examination of their own risk management practices. But would these reforms include evaluating the security of user developed applications (UDAs), the most common of which are spreadsheets, and putting specific guidelines as to when they can – or cannot be – used?

Banks and Spreadsheet Use

Banks have been known to utilise spreadsheets systems for many critical functions because most personnel are well-acquainted with them, and the freedom of being able to develop customised reports without needing to consult with the IT department offers flexibility and convenience. In fact, more than having a way to do financial budgeting and analysing customer profitability, even loan officers and trade managers have become reliant on spreadsheets for risk management reporting and for making underwriting decisions.

But there are more than a few drawbacks to using spreadsheets for these tasks, and the sooner bank executives realise these, the sooner they can adopt better solutions.

General Limitations

Spreadsheets are far from being data base systems and yet more often than not, they are expected to act as such, with figures constantly added and formulas edited to produce the presumably right set of reports.

In addition, data integrity is always a cause for concern as most values in spreadsheets are entered as manual inputs. Even the mere misplacement of a comma or a negative sign, or an inadvertent ?edit? to a formula can also be a source of significant changes in the outcome.

Confidentiality risk is also another drawback of the use of spreadsheets in banks as these tools do not have adequate?access controls to limit access to only authorised individuals. Pertinent financial information that fall into the wrong hands can lead to a whole new set of problems including the possibility of fraud.

Risks in Trading

For trading transactions, spreadsheets can prove to be of immense use – but only for small market volumes. As trade volumes increase and the types vary, spreadsheets are no longer a viable solution and may likely become more of a hindrance, with calculations taking longer in the face of bigger transaction amounts and growing transaction data.

And in trading, there is always the need for rigorous computational functions. Computing for the Value at Risk (VaR) for large portfolios for instance, is simply way beyond the capabilities of spreadsheets. Banks that persist in using them are increasing the risk of loss on those portfolios. Or, they can be opening up?opportunities for fraud?as Allied Irish Bank (in the case of John Rusnak – $690 million) learned the hard way.

Risks in Underwriting

Bankers who use spreadsheets as their main source of information for underwriting procedures also face certain limitations. Loan transactions require that borrowers? financial data be centralised and easily accessible to risk officers and lending officers involved in making decisions. With spreadsheets, there is no simple and secure way of doing that. Information can be pulled from different sources – individual tax returns, corporate tax documents, partnership documents, audited financial statements – hence there is difficulty in verifying that these reports adhere to underwriting policies.

Spreadsheet control and monitoring

Financial institutions which are having difficulty weaning themselves from the convenience and simplicity that spreadsheets offer are looking for possible control solutions. Essentially, they want to find ways that allow them to continue using these UDAs and yet somehow eliminate the?spreadsheet risks?and limitations involved.

Still, the debate goes back and forth on whether adequate control measures can be implemented on spreadsheets so that that the risks are mitigated. Many services have come forward to herald innovative solutions for better spreadsheet management. But at the end of the day, there really is no guarantee that such solutions would suffice.

More Spreadsheet Blogs


Spreadsheet Risks in Banks


Top 10 Disadvantages of Spreadsheets


Disadvantages of Spreadsheets – obstacles to compliance in the Healthcare Industry


How Internal Auditors can win the War against Spreadsheet Fraud


Spreadsheet Reporting – No Room in your company in an age of Business Intelligence


Still looking for a Way to Consolidate Excel Spreadsheets?


Disadvantages of Spreadsheets


Spreadsheet woes – ill equipped for an Agile Business Environment


Spreadsheet Fraud


Spreadsheet Woes – Limited features for easy adoption of a control framework


Spreadsheet woes – Burden in SOX Compliance and other Regulations


Spreadsheet Risk Issues


Server Application Solutions – Don’t let Spreadsheets hold your Business back


Why Spreadsheets can send the pillars of Solvency II crashing down

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Whether the economy is in a downturn or not, management will always aim for a more cost effective IT solution. If your current IT infrastructure is hurting your profitability, our expertise is both ‘tested and proven”.? Also “bleeding edge” solutions in the industry will enable us to find inexpensive alternatives for you.

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Thus, at the end of the day, not only do companies stand to reduce expenditures, they can also boost revenues as a result of increased productivity time.

Do we still have other IT solutions that tackle a different set of problems but arrive at the same outcome, i.e. reduced costs + improved productivity = higher profits? You bet we do.

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  • Provide insights as to where and when changes have to be made. Oftentimes, initiatives to reduce cost and improve productivity are not preceded by the appropriate study especially as with regards to their impact on all departments in the organisation. This usually results in unnecessary duplication of resources, a sure way to increase costs instead.
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Initially, field service software was designed with field techs and their managers in mind. However, in the recent past, other industries have taken this path to better the performance of their businesses. Any industry that deploys skilled laborers and assets to off-site locations benefits from field service software. It’s all about resource allocation and data centralization for efficient management and running of the business? activities. With field service software, you got all your business? functions logged in one place.

So, who needs field service management software? Professionals like electricians, plumbers, IT technicians, construction workers, and carpenters all find it useful. Moreover, there?s a wide range of application in many different types of industries.

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  • Fire and Life Safety

In a fire and life safety industry, equipment and safety systems should be kept running at peak efficiency. Therefore, it’s necessary to provide appropriate services that will ensure the smooth running of processes. On top of complying with government codes, fire and security systems installed should offer reliable services. Since service is at the core of this industry?s operation, most people in fire and security industries are turning to field service software to automate operations of their service delivery. With the field service software tools, the industry can easily monitor security technologies, quickly respond to customers, and manage compliance, inspections, and procedures effectively.

  • Medical Device Enterprises

For medical device companies seeking to improve their services, sales, and compliance, field service software becomes very essential for the smooth running and operations of their functions. The medical device enterprises that greatly benefit from this software include those offering installations, repair, and maintenance of medical equipment. With the comprehensive field service tools, service delivery and performance is greatly improved.

Moreover, with the field service software, these industries find better ways of tracking critical records needed for regulatory compliance since the medical industry is one of the most regulated industries in the globe. For the companies doing the manufacturing of medical equipment, they can integrate field service software in their accounting systems to streamline their invoice processes and shorten their billing cycles.

  • IT and Communications Services Companies

With the remarkable technological advancements in the recent past, Internet service providers, cable companies, and communications organizations are looking for better ways of service delivery to keep up with the pace of the growing technology. Connections are becoming more complex day by day propelled by an explosion in new data sources, and the use of the devices. To keep up with the increased demand for instant services by customers, the IT and communication service companies, are turning to field service software to make their service delivery more effective.

A combination of the robust, advanced scheduling system and rich functionality makes this software very useful to the communication service companies. They can use the software to design and install complex internet infrastructure. Moreover, field service software can be used by these companies to set up recurring maintenance plans to maintain the installed internet systems.

  • Oil and Gas Enterprises

Most oil and gas industries are faced by complexities which need special handling for better business performance. Since the running of projects is at the cornerstone of their businesses, they’re always looking for better ways to ensure a smooth running of their project activities. For this reason, most of the oil and gas enterprises that have discovered the benefits of field service software are integrating the main activities of their projects in this software.

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  • Facilities Management Industry

Given that this is a service industry, high-level of efficiency is paramount. To meet customer expectations and battle against cost, most facility management industries are turning to field service software. With the comprehensive tools included in the field service software, supervisors can assign tasks to their reports, monitor their progress, and receive alerts on critical issues while in a remote place or at the comfort of their office.

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  • Industrial Equipment Enterprises

Industrial equipment companies aim at maximizing their overall productivity and preventing equipment downtime. There?s a wide range of activities that take place in industrial equipment companies which require field service software for higher levels of efficiency.

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Since construction work involve both site work and office work, building industries find field service software very useful in integrating their field and office activities. Field service software is designed to establish effective communication between the office staff and the field operators. With inclusive software tools, the supervisors can easily manage daily inspections and receive feedback from the field workers without leaving the office. Moreover, documentation is simplified, and everything is documented in a central place so that it’s easier to retrieve important information at any time. With field service software, building industries can manage their construction efficiently while minimizing cost, and saving on time.

Filed service software is gaining popularity in the industrial world as most enterprises seek to improve their business? performance, and keep up with the competition. Moreover, more companies are expected to come on board as the field service software companies work extra hard to add more tools to suit a wide range of functions.

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