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

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Data Leakage Prevention – Protecting Sensitive Information

When DuPont lost $400 million in intellectual property, it wasn’t because a hacker from the other side of the world infiltrated their system. The information was simply stolen by a former employee. Alarmingly, data loss incidents are not always caused by deliberate actions.

A file containing personal information accidentally attached to an email and sent to multiple recipients; financial data stored in a USB pen drive, accidentally left in a restaurant; or bank account data of colleagues, inadvertently posted on a company website – these are also some of the everyday causes of data loss.

A report done by research company Infowatch regarding global data leaks in 2010 showed that there were actually more accidental data leaks in that year compared to intentional ones. Accidental leaks comprised 53%, while intentional leaks comprised 42% (the rest were unidentified).

But even if they ?only? happened accidentally, breach incidents like these can still be very costly. The tens of thousands of dollars that you could sometimes end up paying in civil penalties (as in the case when you lose other people?s personal information) can just be the beginning. More costly than this is the loss of customer and investor confidence. Once you lose those, you could consequently lose a considerable portion of your business.

Confidential information that may already be leaking out right under your nose

With all the data you collect, process, exchange, and store electronically every day, your IT system has surely now become a storehouse of sensitive information. Some of them, you may be even taking for granted.

But imagine what would happen if any of the following trade secrets fell into the wrong hands: marketing plans, confidential customer information, pricing data, product development strategies, business plans, supplier information, source codes, and employee salaries.

These are not the only kind of data that you should be worried about. You could also get into trouble if your sloppy IT security fails to protect employee or client personal information such as their names; social security numbers; drivers license numbers; or bank account numbers and credit/debit card numbers along with their corresponding PINs.

In some countries, you could face onerous data breach notification requirements and heavy fines when these kind of data are involved.

There are now more holes to plug

It’s not just the different varieties of sensitive electronic information that you have to worry about. Because these data can take on different forms, i.e. data-at-rest, data-in-motion, and data-at-the-endpoints, you also need to take aim at different areas in your IT system.

Sensitive information can be found ?at rest? in each of your employees? hard disks, in your servers, storage disks, and in off-site backup disks. They can also be found ?in motion? in email, instant messaging, social networking messaging, P2P file sharing, ftp, http, and so on.

That’s not all. Your highly mobile workforce may have already introduced yet another high-risk area into your system: data-at-the-endpoints. This includes USB flash-disks, laptops, portable hard disks, CDs, and even smartphones.

The main challenge of data leak prevention

Having been made aware of the various aspects of data leakage, have you already come to grips with the extent of the task at hand?

There are two major things you need to do here to prevent data leakage.

One, you need to identify what data you have that can be considered as sensitive/confidential information. Of course you have financial information and employee salaries in your files. But do you also store personally identifiable information? Do you have trade secrets that are stored in electronic form?

Two, you need to pinpoint their locations. Are they only on your hard disks and laptops? Or have they made their way to flash drives, CDs/DVDs, or portable HDDs? Are they being transmitted through email or any other file transfer media?

The reason why you need to know what your sensitive data are as well as where they are is because you would like all efforts of securing them to be as efficient and unobtrusive as possible.

Let’s say, as a way of protecting your data, you decide to implement encryption. Since encryption can consume a lot of storage space and significantly reduce performance, it may be impractical to encrypt your entire database or all your files. For the same reason, you wouldn’t want to encrypt every single email that you send.

Thus, the best way would be to encrypt only the data that really need encryption. But again, you need to know what data needs to be encrypted and where those data can be found. That alone is no simple task.

Not only will you need to deal with the data you already have, you will also have to worry about the data that will go through your systems during the course of your day-to-day transactions.

Identifying sensitive data as it enters or leaves your system, goes through your network, or gets stored in your file system or database, and then applying the necessary security actions should be done automatically and intelligently. Otherwise, you could end up spending on a lot of man-hours or, worse, wasting them on a lot of false positives and negatives.

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Will UK Retailers Skim the Cream with ESOS?

The British Retail Consortium (BRC) was quick out on the starting blocks with an ambitious plan to cut energy costs by 25% in 5 years. Their ?25-in-5? initiative is chasing a target of ?4.4 billion savings during the duration. Part of this program involves ?cutting a path through a complex and inaccessible policy landscape?. BRC believes this drawback is making its members think twice about making energy efficiency investments.

The UK?s sprawling network of grocers, department stores and malls is the nation?s second most hungry energy customer, having spent ?3.3 billion on it in 2013 when it accounted for almost 20% of carbon released. If you think that sounds bad, it purchased double that amount in 2005. However the consortium believes there is still more to come.

It bases this assumption on the push effect of UK energy rates increasing by a quarter during the duration of the project. ?So it makes sense to be investing in energy efficiency rather than paying bills,? Andrew Bolitho (property, energy, and transport policy adviser) told Business Green. The numbers mentioned exclude third party transport and distribution networks not under the British Retail Consortium umbrella.

The ?complex and inaccessible policy landscape? is the reflection of UK legislators not tidying up as they go along. BRC cites a ?vast number of policies ? spreading confusion, undermining investment and making it harder to raise capital?. The prime culprits are Britain?s CRC Energy Efficient Scheme (previously Carbon Reduction Commitment) which publishes league tables and ESOS. Andrew Bolitho believes this duality is driving confused investors away.

The British Retail Consortium is at pains to point out that this is not about watering things down, but making it simpler for participating companies to report on energy matters at a single point. It will soon go live with its own information hub providing information for retailers wishing to measure consumption at critical points, assemble the bigger picture and implement best practice.

Ecovaro agrees with Andrew Bolitho that lowering energy demand and cutting carbon is not just about technology. We can do much in terms of changing attitudes and providing refresher training and this does not have to cost that much. Studies have shown repeatedly that there is huge benefit in inviting employees to cross over to our side. In fact, they may already be on board to an extent that may surprise.

Benefits of Integrating IoT and Field Service

Owing to the complexity of its definition, many people loosely use the phrase Internet of Things (IoT) without having a solid grasp of its true meaning. A majority in this category take IoT to be nothing more than the automation of home gadgets, where the internet is used to interconnect computing components embedded in everyday devices.

Granted, the whole idea of IoT got its roots from the home setting. Nevertheless, IoT has outgrown that spectrum and has since penetrated into almost every area of business and industry. By employing IoT, you can literally take full control of everything in your business using a single device. From assigning tasks to monitoring security, managing bills to tracking time, IoT has revolutionized the way business is done.

Interestingly, not so long ago, most technology experts limited their forecasts to machine-to-machine (M2M) integration and Augmented Reality (AR), which also, admittedly, hit the technology industry with an admirable suave. Back then, it could have been laughable for anyone to have suggested that IoT would be so commanding in almost every industry, including real estate, medicine, automobile, and more.

It’s not for nothing, therefore, that the field service industry has also embraced IoT, integrating it in the daily running of business activities, including tracking machine diagnostics, detecting breakdowns, and assigning field engineers to attend to customer needs.

How the Field Service Industry is Benefiting from IoT

Machine uptime has remained an ongoing concern for many customers. In the traditional approach, whenever a machine breaks down, the customer alerts the service provider and then the field service manager checks to see if there is any field engineer available for a new task. Once an engineer has been identified, he?s then dispatched to the site. This worked, but it resulted in an extended machine downtime, a terrible experience for customers.

Thanks to IoT, things are now happening differently.

IoT is now integrating machines to a central communications centre, where all alerts and status updates are sent. The notifications are instant. The field service manager, therefore, gets to learn of the status of machines at the exact time of status change. An engineer who?s not engaged would then be immediately assigned to undertake any needed servicing or repair.

By employing IoT, the service provider receives timely reports relating to diagnostics, machine uptime, part failures, and more. The field manager can, as a result, foretell and forestall any possible downtime.

How has this been helpful?

Before giving a definite answer to that question, it’s crucial to note that more than half of all field service organizations now employ IoT in their Asset Management Systems and Field Service Management. And to answer the question, all the organizations that have the two systems integrated using IoT experience twice as much efficiency as those that don’t, states an Aberdeen Group report. As you already know, improved efficiency results in a corresponding upshot in customer satisfaction.

Apps Making a Difference in IoT-Field Service

The integration of IoT into almost every aspect of business prompted the design and development of different applications to link computing devices. Since the advent of IoT, the software development for the technology has come of age. Powerful and lightweight apps that don simple yet beautiful user interfaces are now readily available at affordable price tags.

A good example of such an App is ecoVaro by Denizon.

ecoVaro not only helps businesses to monitor energy and other relevant environmental data such as Electricity, Gas, Water, Oil, Carbon, Temperature, Humidity, Solar Power, and more, but also provides analytics and comprehensive yet easy to understand reports. The data received from devices such as meters is converted into useful information that’s then presented in figures and graphs, thus allowing you to make decisions based on laid down controls.

The focus of the app is to instantly alert service engineers to go on site to fix issues.

With ecoVaro, field service engineers no longer have to return to the office to get new instructions. Also, customers don’t have to manually fire alerts to the service provider whenever something isn’t working correctly. By employing the latest in IoT, ecoVaro sends notifications to field service managers and engineers about respective customers that need support.

How ecoVaro Helps

Best-in-class companies aren’t ready to compromise on customer satisfaction. Therefore, every available avenue is used to address customer concerns with the deserved agility. By using IoT, ecoVaro makes it possible for field service providers to foresee and foreclose any possible breakdowns.

The inter-connectivity among the devices and the central communications centre results in increased revenue and improved interactivity between the system and the field engineers. This results in greater efficiency and lower downtime, which translates into improved productivity, accountability, and customer satisfaction, as well as creating a platform for a possible expansion of your customer base.

ecoVaro isn’t just about failed machines and fixes. It also provides diagnostics about connected systems and devices. With this, the diagnostics centre receives system reports in a timely manner, allowing for ease of planning and despatch of field officers where necessary.

Clearly, but using the right application, IoT can transform your business into an excellently performing field service company.

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