Spreadsheet Risk – How spreadsheets fuel critical business processes, decisions and errors – Part 1 of 5


This article is the first of a five-part series exploring spreadsheet risk, the challenges it presents and ways to protect your company’s resources and reputation from the risk inherent in spreadsheets.

Everyone has read the stories … Fannie Mae, Conviviality and other firms have made common spreadsheet mistakes that, unfortunately for them, had serious ramifications to their businesses and reputations. Barclays learned the hard way that hidden cells are only hidden from your view. And then there are deliberate issues like fraud, which can easily occur in spreadsheets. With all of this, why do we continue to rely on spreadsheets?

The answer is that spreadsheets are an invaluable and prevalent business tool in organizations of all sizes because of their flexibility and capabilities. And yet, despite their flexibility, spreadsheet-enabled processes continue to be manually-driven, potentially introducing inaccurate data into the decision-making process. The good news is, with proper spreadsheet controls, we can all avoid landing on page 1 of the financial news.

Yet, we continue to read stories of companies making common spreadsheet mistakes, seemingly doing little to prevent them. In addition, while many companies have initiated enterprise digital transformation efforts, managing spreadsheet risk has often been left out of the mix.

This led us to wonder: where is the disconnect? Why aren’t more organizations putting programs and software solutions in place to control spreadsheet risk? Why aren’t companies taking the threat more seriously?

So we set out to explore and understand the answers to these questions.

Spreadsheet study reveals spreadsheet risk is a threat that can’t be ignored

We commissioned Forrester Consulting to develop a 2019 Forrester Opportunity Snapshot study on Spreadsheet Risk. They surveyed business decision-makers (manager level and up) in enterprise companies who routinely make critical business decisions based on data in spreadsheets. The findings from the study, entitled “Think Spreadsheet Risk Isn’t a Threat? Think Again,” confirm that companies are exposing themselves to both financial and reputational risk by overlooking spreadsheet vulnerabilities. It further reveals that spreadsheet risk carries real implications not only for organizations, but also customers and shareholders.

For example, the research indicates companies rely on spreadsheets for making critical business decisions, and use them to model quantitative processes, manipulate data, and inform future planning and decision-making. Almost half of the survey respondents are using spreadsheets for financial models like financial planning and analysis, and corporate performance reporting. And almost 60% of critical business processes, including sales compensation, product tracking and pricing, can require at least 1,000 complex spreadsheets to execute.

The study shows that spreadsheets are the most dominant medium for critical business tasks. In fact, the sheer volume of spreadsheets that businesses rely on is staggering. For example, 88% of organizations use over 100 spreadsheets regularly to make important decisions; 59% employ more than 1,000 spreadsheets. Clearly, inaccurate spreadsheet data can negatively impact financials and increase the chance of reputational risk.

The survey reveals that inaccurate data buried in spreadsheets presents a serious risk to a business, but few are doing anything to control or eradicate these risks.

Spreadsheet risk is a board-level issue

The Forrester study findings verify that many businesses are exposing themselves to financial and reputational risks that are created by spreadsheet vulnerabilities. They further emphasize that spreadsheet risk presents real implications for many organizations, as well as their customers and shareholders. The study also reveals, unfortunately, few businesses are doing anything to control or eradicate those risks.

The decisions businesses make are only as good as the information that fuels them. Confidence in spreadsheet data is critical to the financial health of nearly all businesses. Companies need to be more aware of the risks inherent in spreadsheets and begin to mitigate that risk. The Forrester Consulting study illustrates why spreadsheet risk is a board-level issue that can no longer be ignored. To learn how you can begin to mitigate spreadsheet risk, download the entire Forrester Research survey today.

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