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Mitigating Operational Risk from Spreadsheets: Businesses must take control

Mitigating Operational Risk from Spreadsheets: Businesses must take control

By Christopher Burke, CEO, Brickendon

What do accountants, risk professionals and finance modellers have in common? Their perpetual love for spreadsheets. If you ever speak with them about using spreadsheets, it may closely resemble talking with children about their favourite superhero or barbie doll. They will happily talk to you about the incredible speed at which they can manipulate data, prepare financial models and reports. They will also talk about the flexibility spreadsheets provide and how they themselves have customised their own spreadsheets to make their lives easier and their companies more efficient.

There is no doubt that spreadsheets form a core part of any business and whether it’s for tracking expenses or managing complex and highly sensitive financial data sets, they are a universally essential business tool.

So, given their obvious benefits, why would an organisation as respected as Forbes magazine describe Excel as ‘the most dangerous software on the planet’?[i]  Is it the addictive feeling of running the perfect formula? Or that some users just may not be able to handle the pure numerical truth of your bar graph?

No, it is simply because just one badly managed spreadsheet can open a business to risks that have the potential to singlehandedly cause colossal financial and reputational loss. 

Risks Unseen and Unheard

Having spent decades as an Excel and financial risk specialist, I’ve learned that there are many ways in which spreadsheets and databases can go wrong. From small firms with just a few employees and spreadsheets to global firms with hundreds of thousands of spreadsheets, the risk remains the same. One spreadsheet can cause catastrophic harm. Regardless of who or what is to blame, the most alarming thing is that most business leaders are unaware of the potential damage spreadsheets and other end-user tools can cause. Businesses need to take note now and not only recognise the risks but also learn how to mitigate them.

We recently polled a room of risk management professionals at an industry conference and alarmingly, only 33% of people we asked said they had any kind of policy for managing everyday tools like spreadsheets[ii].

Nearly half of the people we polled (47%) claimed their organisations use more than 1,000 spreadsheets for day-to-day work, and what’s more, according to research from the University of Hawaii [iii], 20% to 40% of spreadsheets are thought to contain errors.

 The Cost of Complacency

For an idea of the financial cost of spreadsheet errors, let’s cast our minds back to 2008 when Lehman Brothers went bankrupt and Barclays bought some of the company’s assets. It was reported that this included the unintentional purchase of 179 contracts which had been hidden rather than deleted in a spreadsheet containing nearly 1,000 rows and 24,000 cells.

However, when the spreadsheet was converted into a PDF to be posted to the bankruptcy court’s website, the hidden cells reappeared. Although Barclays Capital filed a legal relief motion, in the end it was reported that they had to swallow the losses for an undisclosed sum.

In another more recent instance in March 2019, less than a week after posting its latest quarterly earnings, Canopy Growth Corporation, the largest cannabis company by market value, had to issue a correction. The Canadian firm said it was restating one metric in its fiscal third-quarter and nine-month earnings release after a formula error in a spreadsheet. The Smiths Falls, Ontario-based company said the nine-month adjusted EBITDA figure should have been a loss of C$155.2 million ($117.8 million) but was incorrectly stated as a loss of C$69.0 million ($52.4 million). Apparently as a result, the organisation’s shares fell by 3.7% pre-market. These cases don’t even go into the world of legal compliance and data regulation, so we’ll save that for another time.

 To Err-or is Human

There are numerous possible points of failure, especially when you consider the quality of spreadsheet output has (up until now) usually been dictated and controlled by just one human working on computers using software with, at best, some manual checks.

Firstly, the challenge of multiple users copying someone’s “good” spreadsheet and making their own amendments without knowing the breadth of formulae and underlying structure should be of concern. With different people doing different things, often using different methods to manage the same or similar set of data, it is easy to see how quickly errors can escalate.

Such situations are very relatable and can happen to any business large or small, with the implications for version control alone leaving any business exposed to risk, especially if there aren’t mandated ways of working, or special document control protocols.

So, one perfectly natural reaction is to restrict people’s access to data, documents or processes, relying on a single expert with ultimate oversight. A typical scenario in smaller companies, where fewer contributors should, theoretically lead to fewer mistakes and more controlled ways of working.

This is great until that one controller then becomes a single point of failure without the back-up of proofing or cross-checking from other teams, let alone potentially overloading work on a single person.

Finally, the hardest to spot errors come in the shape of formulae or code errors themselves and whilst these can be completely beyond anyone’s control, there are some user habits that don’t necessarily help.

For example, if you repeatedly copy formulas from book to book, or use a single sheet for too long, formulas can fail but go unnoticed due to the trust built up by the users in their long-suffering spreadsheet. 

To Mitigate is Divine

So, how do companies protect themselves against these risks and mistakes regardless of where they come from? For me, the solution is two-fold. Firstly, every business should have an executable compliance policy for managing how all data is handled and allow software to instantly, and cost effectively verify compliance to the policy.

These policies should give guidance to staff on how to manage data, how to use and save spreadsheets in uniform ways and help reduce user errors and boost accuracy.

To back this up, companies should look to the latest technological tools including advances in AI and cloud computing as a means of double-checking, securing and locking down the most important data. This is why my team at Brickendon has built a customisable solution capable of scanning the most complex networks of spreadsheets to automatically detect inconsistencies, mis-performing formulas and/or erroneous trends in version control.

Fast and easy-to-use, EUCplus lets businesses take control of their data and protect their business. It takes away the risk, but still lets organisations carry on with business as usual. It is a simple process to ratify changes to models and calculations, whilst allowing day-to-day data changes to happen as usual.

We named the system EUCplus – or ‘End-User Computing plus’, because we saw the need for a tool that would go well beyond the limits of human error-checking or proofing and perform at great pace. By registering, scanning and securing the data, EUCplus gives businesses the peace of mind they need to get on with their day jobs.

By keeping the flexibility and simultaneously removing the risk from spreadsheets, EUCplus will enable organisations to safely allow spreadsheets to be used by any employee needing to manipulate financial data, rather than limiting access to only ‘love-struck’ accountants and risk analysts. After all, the immense flexibility and multiple functional abilities of spreadsheets do suggest they deserve more credit than they usually get.

[i] *Source: Forbes Magazine “Microsoft’s Excel Might Be The Most Dangerous Software On The Planet”

https://www.forbes.com/sites/timworstall/2013/02/13/microsofts-excel-might-be-the-most-dangerous-software-on-the-planet/#4f19dd85633d

[ii] *The poll was commissioned by EUCplus and conducted at the Cefpro new generation risk conference in London on 13th March. The 52 respondents were all senior operational risk professionals at director level or above.

(1) https://www.accountingweb.co.uk/business/financial-reporting/worlds-largest-weed-business-makes-blazing-spreadsheet-error

[iii] *Source: “What we know about spreadsheet errors” Raymond R. Panko, University of Hawaii, College of Business Administration Published in the Journal of End User Computing’s Special issue on Scaling Up End User Development Volume 10, No 2. Spring 1998, pp. 15-21 Revised May 2008

Business

Return to work: Flexibility, preparation and communication are key

Return to work: Flexibility, preparation and communication are key 36

By Matt Weston, Managing Director, Robert Half UK

As lockdown restrictions ease for the foreseeable future, conversations across the business world are starting to turn to how employers can safely and seamlessly prepare for their workforce to return to the office.

Research from Robert Half has found that over half (54%) of employees are worried about working in close proximity to their colleagues, while a similar proportion are eager to return to the office due to loneliness working from home (45%) or concerns about missing out on career opportunities (30%).

Unsurprisingly, after everything companies and their employees have done to successfully adapt their operations and working practices to social distancing rules over the last few months, immediately returning to the old ways of working will likely neither be sensible or practical. With safety being the key priority for the ‘new normal’ of office life – communication, flexibility and preparation should be the main focus areas for employers.

With this in mind, what are the challenges and opportunities that employees anticipate as they prepare for the return to work, beyond government and industry supplied health and safety best practice? Furthermore, how can employers best support their staff during this period?

Keep people at the heart of change

It is important to recognise that your workforce has been working through an intense period of uncertainty and change for months, which can be incredibly unsettling. On top of this, working for weeks in isolation without the usual physical interactions with team members could be potentially detrimental to employee engagement and mental wellbeing.

Having adjusted to keep staff connected with one another from a distance with virtual team building exercises, video calls and daily check-ins, as teams begin working in hybrid models with some in the office and others remote, staff engagement will need to adapt again.

Managing people with greater sensitivity and maintaining positivity throughout will be crucial. To help instil a sense of normality and engagement, encourage maximum collaboration between individuals (in accordance with social distancing rules), and make sure teams feel part of company goals and opportunities through regular meetings and communication – no matter their location.

Continuing to invest in technology and offering flexibility will also be important to ensuring that people can continue to work remotely or on-site, either in accordance with their own wishes or as part of your staggered return-to-office plan.

Communicate, communicate, communicate (and listen)

Reassuring staff that they are able to safely return to the office will require continuous communication. From expectations of the physical office, to expectations of how to operate within hybrid teams, these new expectations and new workplace requirements should be communicated to all staff clearly to avoid confusion.

Regular email updates, updates on the company’s intranet and social media channels, as well as frequent town hall meetings (either online or in a smaller setting) could be key elements of an effective communications approach.

Also, consider a feedback channel to allow staff within the team to offer thoughts on their experience of returning to the office and any suggestions on improving the process. Whether on a company-wide basis or a team-by-team approach, schedule regular check-ins to engage with employees’ questions and concerns.

Maintaining open communication channels with your team will be essential for keeping up employee morale and ensuring clarity. For example, if some employees aren’t comfortable with coming to the office every day, then they should have plenty of opportunities to voice their concerns and have them dealt with promptly, respectfully and fairly.

Staggered return-to-office planning

Depending on the size of business and density of office space, maintaining home working arrangements across teams on an alternating basis could make it easier to implement safe social distancing. This involves select teams working remotely while others work on-site on any given day.

An alternating approach to remote working might also reduce the risk of staff feeling pressured or overwhelmed by an immediate return to the office five-days-a-week. After all, some families might be juggling temporary disruptions to childcare arrangements and public transport systems will likely become crowded again. So, a transitionary period will help everyone adjust to post-lockdown office working.

Finally, if you have developed your technology infrastructure to facilitate remote working, you would do well to continue to leverage these new capabilities as in all probability, a mixture of remote and at-office work will be needed for some time.

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Business

Contis enters RBS Capability and Innovation Fund bid seeking £35 million for disruptive SME growth strategy  

Contis enters RBS Capability and Innovation Fund bid seeking £35 million for disruptive SME growth strategy   37

Leading payments provider, Contis, has applied for two grants from the RBS & BCR Alternative Remedies Package, totalling £35 million.  

Unlike most applicants who will deploy funds through a single brand, Contis is taking a completely different approach. The funding will be used to drive fintech innovation in the UK by developing an off the shelf, B2B electronic and card payment technology platform for SMEs. With Contis’ powerful tech stack and regulated status, this will empower hundreds of fintechs to support the SME market with groundbreaking technologies, payments and lending capabilities. Contis today services over 800,000 consumer accounts, 14,500 business accounts and processes £4bn in transactions per year, demonstrating a proven track record.   

UK businesses are facing a challenging economic environment with the impacts of Covid-19 and Brexit. As large corporations and entire sectors are affected, SMEs will play a vital role in the recovery. Contis’ approach is completely disruptive, offering three channels to maximise support for SMEs and sole traders, through three unique brands, all powered by APIs from Contis’ modular and configurable engine. 

1.       Canvas for Business 

Contis is a super-vendor in the world of fintech, offering payments through proven banking rails and card scheme capabilities including issuing pre-paid, debit and virtual cards. They’re linked to digital delivery like Apple Pay and Google Pay, and a trusted tech stack that boasts 99.99% uptime.  

With funding from the Capability and Innovation Fund (CIF), Contis’ technology and regulated services will be made available to the whole fintech community, enabling them to provide dedicated SME accounts with the latest leading-edge capabilities delivered via Contis’ wholly owned, secure, cloud-based technology and apps. Contis’ solution has a firm eye on the need for SMEs to compete internationally, particularly after Brexit, and offers FX integration as standard.  

Canvas for Business will increase competition by providing fintechs serving the SME market with technology that outstrips the big banks. Contis will also provide credit referencing capabilities and empower fintechs to lend to their SME client base through Contis’ own credit licence. Without the constraints of legacy systems, it will enable simple connectivity to accounting and payments solutions, as well as to unlimited future innovations.  

2.       Engage for Business 

Over 150 Credit Unions currently use Contis’ Engage service and technology, and hold an estimated £400 million in undeployed cash reserves. Developed with CIF funding, Engage for Business will enable Credit Unions to launch business accounts and payments products for the first time, and allow excess funds to be redeployed in the SME sector through business support loans. This will revolutionise access to funding for sole traders and small businesses. 

3.       Freedom for Business 

With CIF funding, Contis will also offer large scale SMEs a direct-to-market solution where Contis holds the relationship and provides a bespoke offer to meet the business’ exact needs. 

Contis’ application to the Capability and Innovation Fund is focused on creating the widest possible impact for UK SMEs by fulfilling their accounts & payments needs and driving innovation in SME financial services. 

Through the grant, Contis will empower over 200 fintechs and Credit Unions to provide credit, simplify payments integration into everyday business needs, offer digital credit referencing, provide budgeting tools to SMEs, enable automated payments, give predictive insight on cash flow, provide rewards to SMEs on spending, and much more. 

Peter Cox, Founder and Executive Chairman of Contis said: “Our mission is to democratise payments and financial services for all SMEs, so they’re spoilt for choice with innovative and affordable solutions that meet their exact needs. Our approach, based upon proven technologies, will broaden and disrupt the services available to SMEs far beyond the capabilities of existing providers such as the big banks.  

“By driving competition and innovation, while improving the availability of funding, our approach will increase the services on offer to SMEs and make them more affordable, therefore becoming easier for every entrepreneurial person with vision to run their own businesses.” 

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Business

Four years of digital transformation in four weeks: UK lockdown puts pressure on brands to digitally deliver

Four years of digital transformation in four weeks: UK lockdown puts pressure on brands to digitally deliver 38

Nearly a third (32%) of consumers would switch providers if a brand’s website is unavailable for more than 24 hours

A study released today reveals the scale of omni-channel pressure brands now faced as a result of the Covid-19 pandemic, as consumers flock to apps and websites to as the priority destination to transact with brands.

The UK has experienced a huge leap in use of online services thanks to lockdown, with the public appearing to have less concern for the availability of a brand’s physical location. Research by Sungard Availability Services (Sungard AS) uncovers a “window of availability” that UK businesses now have before consumer loyalty changes:

  • If a brand’s website is down for 24 hours – 32 percent of consumers would switch provider
  • If a brand’s app is down for 24 hours – 28 percent of consumers would switch provider
  • If a physical store is closed for 24 hours – 20 percent of consumers would switch provider

The results by industry paint an interesting picture of the availability timeframes brands are expected to adhere to:

  • For online retailers, excluding grocery retailers – 23 percent of consumers would switch provider if they could not access online services for 12 hours, rising to over a third (34 percent) after 24 hours
  • For financial services and entertainment streaming platforms – 21 percent of consumers would switch provider after 12 hours, rising to 33 percent after 24 hours
  • In the case of online grocery shopping – 20 percent would switch provider after 12 hours, rising to one third 33 percent after 24 hours

The findings also highlight that as digital reliance increases, so will consumer expectations towards availability in the future. Over the coming two years, a third (33 percent) of consumers expect online financial services to always be available, rising to 35 percent for streaming services.

“UK consumers have become reliant on the constant availability of online services, and lockdown has only served to heighten this,” comments Chris Huggett, SVP, EMEA at Sungard AS. “What used to be a choice between physical and digital has now firmly accelerated into digital environments across various industries. As online worlds continue to outpace bricks and mortar as the face of businesses, ensuring constant availability and clear communications on downtime will be key for brands to build trust and loyalty.

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