Recently, the Bank of England published its third concurrent stress test results of the UK’s banking system. Based on the Bank’s new approach, this stress test is perhaps the severest yet in examining the resilience of the banking system. Data plays a critical role in the complex process of stress testing, and most stress tests are conducted wholly or partially via spreadsheet-based models in banks and financial institutions. The issue is that the use of these spreadsheets and other end user computing (EUC) applications is uncontrolled, which potentially threatens the integrity of data used and therefore the accuracy of output from the stress test models.
Banks and financial institutions, who invest heavily in IT systems, are comparatively lax in the management of their spreadsheet and EUC landscape, even though it underpins their regulatory compliance and model governance initiatives. In particular, IT departments in banks prefer the use of enterprise business applications, so gaining their mind share for proper use of spreadsheets is often a challenge. Nevertheless, aware of the reasons of why users are drawn to EUCs, regulators are now demanding that banks demonstrate transparency around the ecosystems of tools that feed their stress test models.
Managing the spreadsheet landscape is a challenge
EUCs are a double-edged sword. They are quick and easy to deploy, facilitate agility and deliver flexibility in evolving market conditions and advancing regulations. At the same, they are extremely difficult to manually manage and control.Spreadsheets contain a vast amount of data, stored in multiple sheets, making discrepancies difficult to identify. This is further compounded by linkage of these applications to each other via formulae, creating an environment where changes and discrepancies are not visible, often occurring in data not intended to be viewed after initial data input. With banks depending on 100’s of spreadsheets to support their governance models, even a single data error in one file can proliferate across the organisation’s wider EUC landscape, feed inaccurate data into a model to produce incorrect outputs.
Furthermore, spreadsheets are often shared and transferred between users, resulting in multiple versions of the same documents, but only one of which is up to date. If they are not stored and labelled correctly, subsequent users are unable to identify which spreadsheet is the current version containing up to date data, potentially causing discrepancies from the use of old or incorrect data.
Why automating the EUC management process is essential?
A central aspect of data quality is transparency, and banks need EUC management to establish how data is created and where the transformations in the figures and stress test models are occurring. In doing so, they can verify the processes and controls to ensure good quality data.
Technology can facilitate the adoption of best practice processes to ensure data quality by embedding governance into the business operation, supporting everything from creation of new EUC applications through to eventual decommissioning of these files. Enabling banks to understand and control the entire data ecosystem that surrounds the stress test model can provide a means to establish what type of EUC the data is coming from – e.g. spreadsheets or access databases; whether it isa single spreadsheet or multiple spreadsheets that feed data into the model; and what the data linkages between the various data feeds are etc. This visibility comes from a process of discovery including scanning file shares and repositories; as well as analysing the overall EUC estate structure, properties and content. Banks are then able to rank the inventory of files by the level of risk(or materiality) they pose based on the risk appetite of the organisation, providing holistic view of the complex web of data flows, on an ongoing basis.
A technology-led approach to EUC data quality management eliminates the need for manual checking, which is extremely inefficient.Even though the adoption of EUCs for modelling delivers initial benefits to users such as speed, reliability and costs – compared to the absence of a technical solution for a new operational business requirement in the enterprise system – there are challenges. The use of EUCs require manual operational processes such as augmenting and aggregating data. These spreadsheet processes can require multiple people to update and review the contents and as such users spend a lot of time double checking the EUCs’ data integrity, negating some of its original advantages.
This manual effort is hiding a huge cost to organisations. Consider this: for arguments sake, there is a population of 100 operational EUCs with an average of 8 hours per month spent on each application at a fully costed employee rate of £50 per hour. This means that each EUC costs £400 per month or £4,800 per year to operate. For the full EUC population, this translates into £480,000 for the year.
Additionally, a technology-led approach to EUC data quality management helps credibly demonstrate the validity of stress test models and the accuracy of the corresponding outputs to satisfy the regulators. EUC management solutions enable banks to set up data change management processes and control mechanisms, supported by an audit trail to ensure that the integrity of the data is always maintained.
It’s important to note that even with automation of EUC management processes, users are able to add expert judgment by altering data sets in spreadsheets to improve the alignment between theoretical calculations and the real world. The automation offered by technology solutions also facilitates re-attestation of the models, and tools that feed them, so banks can periodically re-evaluate the models to ensure that they are indeed working as desired by the organisation.
Data quality and integrity underpins the success of all model governance, not just stress tests. Given that spreadsheets and other EUCs will continue to be used for model development in the foreseeable future, automating EUC management processes makes spreadsheet usage safe and in fact favourably contributes towards the larger risk management efforts of banks.
About the author
Henry Umney is Vice President of Sales at ClusterSeven and is responsible for the commercial operations of ClusterSeven, overseeing globally all Sales and Client activity as well as Partner engagements.Henry brings over 20 years of experience in sales and account management in financial services. Prior to ClusterSeven, he held the position of sales director in Microgen, London and various sales management positions in AFA Systems and DART, both in the UK and Asia.
Duo glide around world’s largest fountain in Dubai
Paragliders Llorens and Goberna take magical flight above the Palm Fountain.
Horacio Llorens and Rafael Goberna defied gravity to perform The Breaking Pointe flight around the world’s biggest fountain at The Pointe, Palm Jumeirah in Dubai. Here is all you need to know:
– Spaniard Llorens is a five-time world champion and Infinity Tumbling Guinness World Record holder, who has performed a series of spectacular projects during the last five years including paragliding with a flock of starlings and with the beautiful Aurora Borealis as a backdrop.
– Brazilian Goberna was a Guinness Book of World Records winner at only 12-years-old and, in December 2016, he took to the skies above one of the seven wonders of the natural world when paragliding at Iguazu Falls.
– This time around, the duo teamed up in Dubai to showcase The Palm Fountain at the Pointe, Palm Jumeirah. They overcame a tricky preparation period to expertly glide between the fountain’s powerful jets of water.
– Spanning across the boulevard, the Palm Fountain features two giant floating platforms covering 14,000 square metres of sea water. Reaching an impressive 105 metres high and lighting up the Dubai sky with 3,000 LED lights, the fountain “dances” to hit songs from sunset until midnight.
– They undertook training first at Paramotor Desert Adventure on January 12 to test out their brakes and motors with technician Ramon Lopez finally arriving after being held up by the heavy snow in Madrid.
– Training was crucial for the challenge of flying during the night with low visibility as safety director Alan Gayton ensured they had a reserve parachute in case of a technical issue with the main parachute. Llorens and Goberna also had to study the movement of the water with great precision in order not to get caught up in the jets of water
– Flying over water, it was also mandatory to have a lifejacket with rescue boats, jet skis and divers on hand which came handy when Goberna suffered a technical malfunction on the first January 14 practice run.
– After repairs long into the night, they returned to Paramotor Desert Adventure to test out the motors again before completing the stunning flight on January 15 with Llorens and Goberna performing in harmony.
– Llorens, 38, revealed: “As soon as we got the opportunity, we wanted to fly there. We needed to know the area really well beforehand and we needed to know how to ‘play’ with the fountain – this was new for us. Such strong streams of water shooting 100 metres up is a lot, so we had to be really prepared.”
– Goberna, 26, explained: “The motor wasn’t flying so good because, prior to arriving in Dubai, it was last used in Europe at high altitude. I needed to adjust the carburettor in the air inside the motor. In the first practice flight over the water, I broke one propeller. I really couldn’t understand what was happening and then another one broke. Eventually, a backup motor was required. After a long journey, the final result was beautiful! The team worked incredibly hard to make it.”
– Llorens added: “The highlight for me was playing between the super shooters with Rafael, because it’s something we’ve never done before; it felt really new and really powerful.”
EU sets itself jobs, training and equality targets for 2030
By Jan Strupczewski
BRUSSELS (Reuters) – The European Commission on Thursday announced goals for the 27-nation bloc to reduce poverty, inequality and boost training and jobs by 2030 as part of a post-pandemic economic overhaul financed by jointly borrowed funds.
The EU executive arm said the European Union should boost employment to 78% in 2030 from 73% in 2019, halve the gap between the number of employed women and men and cut the number of young people neither working nor studying to 9% from 12.6%
“With unemployment and inequalities expected to increase as a fallout of the pandemic, focusing our policy efforts on quality job creation, up- and reskilling and reducing poverty and exclusion is therefore essential to channel our resources where they are most needed,” the commission said.
The goals, which will have to be endorsed by EU leaders, also include an increase in the number of adults getting training every year to adapt to the EU’s transition to a greener and more digitalised economy to 60% from 40% now.
Finally, over the next 10 years, the EU should reduce the number of people at risk of poverty or social exclusion by 15 million from 91 million in 2019.
“These three 2030 headline targets are deemed ambitious and realistic at the same time,” the commission said.
The goals are part of the EU’s set of 20 social rights, agreed on in 2017, to make the EU more appealing to voters and counter eurosceptic sentiment across the bloc.
They say everybody has the right to quality education throughout their lives and that men and women must have equal opportunities in all areas and be paid the same for work of equal value.
The unemployed have the right to “personalised, continuous and consistent support”, while workers have the right “to fair wages that provide for a decent standard of living”.
(Reporting by Jan Strupczewski; Editing by Nick Macfie)
UK aero-engineer Meggitt eyes return to growth after pandemic slump
LONDON (Reuters) – British engineer Meggitt said that it could return to profit growth in 2021 provided there are no further lockdowns, despite a weakening in the struggling aviation market at the end of 2020 and early this year.
Pandemic restrictions halted much flying globally last year and forced plane makers Boeing and Airbus to cut production rates, dragging down suppliers like Meggitt, which makes and services parts for such aircraft.
Meggitt’s underlying operating profit plunged by 53% to 191 million pounds ($267 million) in 2020, it said on Thursday, despite continued growth in its defence business which makes parts for military jets and accounts for about 45% of the business.
Meggitt, however, said it expected air traffic to recover in the second half of the year which would help it return to profit growth over the year, although its guidance for flat revenue disappointed analysts who had expected growth of 6%.
Meggitt’s Chief Executive Tony Wood said in November that he had expected flying to start to recover by Easter, but new variants have led to more restrictions and delayed the recovery.
“It has gone back a couple of months… it’s now very much in the summer,” Wood said of the recovery in an interview on Thursday.
Further in the future, Meggitt is positioning itself for the move to lower emissions flying, and its sensors and electric motors will be used on electric urban air mobility platforms, such as flying taxis, and in hybrid aeroplanes being developed.
But Meggitt said new tax breaks announced in Britain’s annual budget on Wednesday aimed at encouraging investment would not change its plans.
“Yes, it will be a benefit. Are we looking at any acceleration as a result specifically of that? Not really,” Woods said.
Shares in Meggitt were down 1% to 427 pence at 0943 GMT. The stock has risen by 50% since news of a COVID-19 vaccine last November, but is still down 23% on where it was pre-pandemic.
($1 = 0.7165 pounds)
(Reporting by Sarah Young; Editing by Alistair Smout and Susan Fenton)
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Duo glide around world’s largest fountain in Dubai
Paragliders Llorens and Goberna take magical flight above the Palm Fountain. Horacio Llorens and Rafael Goberna defied gravity to perform...