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

?

Advert-Book-UK

amazon.co.uk

?

Advert-Book-USA

amazon.com

Contact Us

  • (+353)(0)1-443-3807 – IRL
  • (+44)(0)20-7193-9751 – UK

Check our similar posts

Technology and process improvement

Tightening organisational flow to improve productivity and minimise costs is a growing concern for many businesses post the Global Financial Crisis. Businesses can no longer afford to waste time and personnel on inefficient processes. Organisations using either Six Sigma or Lean techniques better manage their existing resources to maximise product out-put. Both of these techniques involve considerable evaluation of current processes.

What is Six Sigma?

Six Sigma is an organisational management strategy that evaluates processes for variation. In the Six Sigma model, variation equates waste. Eliminating variation for customer fulfilment allows a business to better serve the end-user. In this thought model, the only way to streamline processes is to use statistical data. Each part of a process must be carefully recorded and analysed for variation and potential improvements. The heart of the strategy embodied by Six Sigma is mathematical. Every process is subject to mathematical analysis and this allows for the most effective problem solving.

What is a Lean Model?

Lean businesses do not rely on mathematical models for improvement. Instead, the focus is on reducing steps in the customer delivery cycle, which do not add value to the final deliverable. For example, maintaining excess inventory or dealing with shortages would both be examples of waste behaviour. Businesses that operate using Lean strategies have strong cash flow cycles. One of the best and most famous examples of Lean in action is the Toyota Production System (TPS). In this system, not only is inventory minimised, but physical movement for employees also remains sharply controlled. Employees are able to reach everything needed to accomplish their tasks, without leaving the immediate area. By reducing the amount of movement needed to work, companies also remove wasted employee time.

Industry Applications for Lean and Six Sigma

Lean businesses reduce the number of steps between order and delivery. The less inventory on hand, the less it costs a business to operate. In industries where it is possible to create to order, Lean thinking offers significant advantages. Lean is best utilised in mature businesses. New companies, operating on a youthful model, may not be able to identify wasteful processes. Six Sigma has shown its value across industries through several evolution’s. Its focus on quality of process makes it a good choice for even brand new businesses. The best use is the combination of the two strategies. With the Lean focus on speed and the Six Sigma focus on quality combined, the two organisational processes create synergy. By itself, Lean does not help create stable, repeating success. Six Sigma does not help increase speed and reduce non value-added behaviours. Combined, these two strategies offer incredible value to every business in cost savings.

Using Technology to Implement Lean Six Sigma

Automation processes represent an opportunity for businesses to implement a combination of both Lean and Six Sigma strategies. Any technology that replaces the need for direct human oversight reduces costs and increases productivity. A few examples of potentially cost saving IT solutions include document scanning, the Internet, and automated workflow systems.

  • Document Scanning – Reducing dependency on paper copies follows both Lean and Six Sigma strategies. It is a Lean addition in that it allows employees to access documents instantly from any physical location. It is Six Sigma compliant in that it allows a reduction on process variation, since there is no bottleneck on the flow of information.
  • The Internet – The automation potential offered by the Internet is limitless. Now, businesses can enter orders, manage logistics and perform customer service activities from anywhere, through a hosted portal. With instant access to corporate processes from anywhere, businesses can manage workflow globally, allowing them to realise cost savings from decentralisation.
  • Automated Work Systems – One of the identified areas of waste in any business is processing time. The faster orders are processed and delivered, the greater the profits for the company and the less the expense per order. When orders sit waiting for attention, they represent lost productivity and waste. Automated work systems monitor workflow and alert users when an item sits longer than normal. These systems can also reroute work to an available employee when the original worker is tied up.

Each of these IT solutions provides a method for businesses to either reduce the number of steps in a process or improve the quality of the process for improved customer service.

Identifying Areas for Lean Six Sigma Implementation

Knowing that improved processes result in improved profits, identifying areas for improvement is the next step. There are several techniques for creating tighter processes with less waste and higher quality. Value Stream Mapping helps business owners and managers identify areas of waste by providing a visual representation of the total process stream. Instead of improving single areas for minimal increases in productivity, VSM shows the entire business structure and flow, allowing management to target each area of slow down for maximum improvement in all areas.

Seeing the areas of waste helps management better determine how processes should work to best obtain the desired outcomes. Adding in automated processes helps with improved process management, when put in place with a complete understanding of current systems and their weaknesses. Start with mapping and gain a bird’s-eye view of the situation, in order to make the changes needed for improvement.

Contact Us

  • (+353)(0)1-443-3807 – IRL
  • (+44)(0)20-7193-9751 – UK
Field service and improved visibility

A manager is someone who has control over a company. They are given the responsibility of overseeing what the company does and making important decisions. The manager is the most important person in the empire and needs to be in the know at all times. Not what happened a day ago but in real-time and from any place.

Information is necessary for this to happen. It needs to be concise, brief and straightforward. Ideally, access to job status, location information, customer information, notifications and location information should be on the palms of their hands.

To sum it all up, there should be fluid communication among personnel in the field. Information should be accessed easily from one place as it flows to another to maintain steady two-way communication. This is possible with automation meaning that no amount of data will be left unseen or unused because of paperwork that was never handed over or looked into, reducing the chance of misinformation or missing information to a minimum.

Ways improved visibility will help your business through Field Service

Organisations using field services will agree that improved visibility has more business benefits and the real question is what aspect needs improving rather than discussing the benefits.

Real-time visibility

Managers need to be in the know from anywhere at any time. The manager needs information about the company. The need not to be physically present to have an idea of what’s going on. They should know everything at all times, from what was planned for the day to real-time events.

All this information should be easily accessed from one central point and should contain everything about the company and other relevant information.

Extending the back office into the field

This two-way communication is virtually irreplaceable. At any time, the information should flow among technicians in the field and those in the back office. This will help to have a better idea of how to manage the workload and come up with solutions to some work-related issues.

Everyone in the team should be informed and be up to speed about real-time events. Keeping everyone updated improves visibility because they can make updates and decisions based on the kind of information they get.

No more lost paperwork

Managing paper trail can be quite a hassle for organisations. With tons of workload, there can be many delays meaning that some information might be missed or forgotten. People might also choose not to turn up for work for days on end and can affect how much info is processed. Some work can be left undone, and work not invoiced.

When organisations use field service management services, information is fed only once and everything else is done automatically. Say goodbye to lags or relying on last month?s data. Work will move faster because people will have more time to focus on important things rather than chasing an endless paper trail.

Business intelligence

Field service management technology will let you know what is being done in the field and with such an abundance of data, will make sound decisions for the business.

Every decision is hinged on cold facts. Information needs to be easily accessed and filtered into the right categories so that sound business decisions are made from the collected data.

Growing revenue

The abundance of real-time information and improved visibility can determine whether a business will grow or not. Each piece of information can show trends that are critical for any business to improve. Trends show how each sector is doing and sheds more light into specific areas that need a total overhaul. This may include improving customer service, products on retail or hiring more technicians.

Without information, a company is one step closer to going out of business. Every action should be geared to increase the revenue and this starts by making the right choices.

Visibility when working offline

Working offline is an issue that can affect visibility. Sometimes agents will need to work in areas that have little network coverage or are deep down working in tunnels or are around heavy machines and turbines. Field service solutions are built for the mobile environment and for workers who may find themselves in non-connected areas so that they can still use their device while offline. This makes sure that there is no loss of information while working in-field

Time-saving

Certainly, business is constrained to its environments and if the demand changes it should prove to be flexible enough to adjust to changes as they happen. Field service solutions operations like schedule need to update instantly. Once activities start rolling, nothing should create lags in the schedule so that operations flow seamlessly at all time.

Field workers can then make updates and document changes easily on the job site directly on their device by using responsive site menus, drastically saving time while feeding data and complete orders.

Improved customer service

It is not a clich? to say that the customer is always right. With real-time information, both field service and back-office technicians can improve customer relations and satisfaction. With a unified system of sharing information like the ERPs and CRMs, the field officer can know more about specific clients, their history and other data to know more about what should be done in current and future orders. This means that better decisions will be made for each customer.

How improved visibility benefits different parts of the organisation

Improved visibility in all areas of the business makes information more accessible. Here are some of the benefits that various sects of a business can get from improved visibility.

? The business owner
The manager owns the company and can access all information with just a single tap. A lot of data can be used to analyse the health of the venture. This includes revenue, inventory, customer surveys, employee hours, invoices and customer data.
Profitability is increased by putting more emphasis on customer satisfaction and improving the quality of end products and services.

? The service manager
The service manager can see what is going on in the field in real-time, and look into measures that can improve the productivity of staff members in various departments.
And with workflow automation, time-saving is at the maximum because there is less paperwork consequently improving scheduling and job completion rates.

? Service administrator/ dispatcher
For the team in the office, they can assign tasks faster. Scheduling is automatically done and updated in real-time. It eliminates the need for paperwork and leaves more time to be productive on other errands.

? The field technician
Improved visibility for a field worker means that they can do their best in any task. They can share or get critical information about orders and customers. This drastically improves job completion rates and customer satisfaction.

? HR
Live information can be used to track certain orders, the time it takes to complete orders, and the number of staff required in the organisation. Such data can be used in HR to reduce payroll errors and erroneous overtime costs.

? Finance
Field service management software can also benefit the finance team by automation of invoices. A work order can be tracked from start to the end and invoiced immediately to retain faster payments. Relevant data can be used to track revenue and expenditures, and costs.

Real-time visibility gives a company many solutions to manage the workload. In the end, visibility is also useful in increasing revenue and a smooth transition of information for the company.

How Internal Auditors can win The War against Spreadsheet Fraud

To prevent another round of million dollar scandals due to fraudulent manipulations on spreadsheets, regulatory bodies have launched major offensives against these well-loved User Developed Applications (UDAs). Naturally, internal auditors are front and center in carrying out these offensives.

While regulations like the Sarbanes-Oxley Act, Dodd-Frank Act, and Solvency II can only be effective if end users are able to carry out the activities and practices required of them, auditors need to ascertain that they have. Sad to say, when it comes to spreadsheets, that is easier said than done.

Because spreadsheets are loosely distributed by nature, internal auditors always find it hard to: locate them, identify ownership, and trace their relationships with other spreadsheets. Now, we’re still talking about naturally occurring spreadsheets. How much more with files that have been deliberately tampered?

Spreadsheets can be altered in a variety of ways, especially if the purpose is to conceal fraudulent activities. Fraudsters can, for instance:

  • hide columns or rows,
  • perform conditional formatting, which changes the appearance of cells depending on certain values
  • replace cell entries with false values either through direct input or by linking to other spreadsheet sources
  • apply small, incremental changes in multiple cells or even spreadsheets to avoid detection
  • design macros and user defined functions to carry out fraudulent manipulations automatically

Recognising the seemingly insurmountable task ahead, the Institute of Internal Auditors released a guide designed specifically for the task of auditing user-developed applications, which of course includes spreadsheets.

But is this really the weapon internal auditors should be wielding in their quest to bring down spreadsheet fraud? Our answer is no. In fact, we believe no such weapon has to be wielded at all?because the only way to get rid of spreadsheet fraud is to eliminate spreadsheets once and for all.

Imagine how easy it would be for internal auditors to conduct their audits if data were kept in a centralised server instead of being scattered throughout the organisation in end-user hard drives.

And that’s not all. Because a server-based solution can be configured to have its own built-in controls, all your data will be under lock and key; unlike spreadsheet-based systems wherein storing a spreadsheet file inside a password-protected workstation does not guarantee equal security for all the other spreadsheets scattered throughout your company.

Learn more about Denizon’s server application solutions and discover a more efficient way for your internal auditors to carry out their jobs.

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

?

Advert-Book-UK

amazon.co.uk

?

Advert-Book-USA

amazon.com

 

Ready to work with Denizon?

Contact Us Today