Are you sure your spreadsheets are error-free?
Eighty-eight percent of spreadsheet documents contain errors, as stated in a recent article in MarketWatch, which cited a 2008 analysis of multiple studies. Ray Panko, a professor of IT management at the University of Hawaii and an authority on bad spreadsheet practices, noted, “Spreadsheets, even after careful development, contain errors in 1% or more of all formula cells. In large spreadsheets with thousands of formulas, there will be dozens of undetected errors.”
Earlier this year, Sageworks polled over 130 financial institutions and found that eighty-four percent are using spreadsheets for one of their most complex and challenging calculations, the allowance for loan and lease losses.
Working with over 700 financial institutions, Sageworks’ consultants have regularly heard from spreadsheet users about a number of challenges such as version control issues, errors in calculations and a complicated process that is inflexible, decentralized and non-transferrable should any changes occur with bank personnel or with accounting standards and regulations.
Besides errors, there are other risk management limitations that institutions should be aware of when using spreadsheets. These programs, such as Microsoft Excel, aren’t designed to process large volumes of data, and it can be difficult to export data from these programs to other applications the institution may use for spreading, global cash flow analysis, exception tracking or reserves.
Many institutions have decided to discontinue the use of their spreadsheets and implement a web-based solution to perform their credit analysis and ALLL calculations with increased accuracy, consistency and efficiency.
For more information on common concerns that regulators have with spreadhseets, download the whitepaper titled: Regulator Concerns with Spreadsheets in Risk Management.
To learn more about how Sageworks can help your financial institution transition away from spreadsheets, check out our risk management solutions.