Spreadsheets have proven an essential tool for businesses of all sizes, equipping users with the means to better manage complex sets of data and simplify a number of business processes and projects. Providing a valuable and flexible toolset, spreadsheets help support the day-to-day processes of many businesses, with this great adaptability meaning that companies have become dependent on spreadsheets for critical information like cost management and invoicing. Yet, it is due to this great reliance on the format that potential risk is increased.
Spreadsheet risk is best defined as the impact on a business due to unintentional or overlooked errors, mistakes, and deletion of data in the key spreadsheets that a business depends on and that support decision making at a business. What might seem like a minor error can have a very tangible impact on revenue, as is clear from cases like that of JP Morgan in 2012 when a simple copy and paste error on a new value at risk model led to the business losing over $6 billion.
There are a number of ways that spreadsheet risk can occur, however, some of the most common examples and cases in which risk is increased include:
- If end users are copying data from one sheet to another. This can often lead to formulas unintentionally being altered and original formatting being disrupted.
- If there are multiple versions of a critical spreadsheet in use through a company. This can result in out of date information being used on future documents.
- If two spreadsheets are linked together and use data from one or more spreadsheets to give the results of another. This means that if any error is made on any of the source spreadsheets, the results of the other spreadsheet will be compromised.
- If a spreadsheet uses particularly complex or advanced functionality and formulas to give results. This sharply increases the potential for errors, making any faults more difficult to spot.
Undoubtedly, spreadsheet risk is one of the most underestimated threats to businesses, presenting the potential for both financial and reputational loss. It is therefore essential that companies ensure they are effectively managing their spreadsheets to prevent incurring any loss. Therefore, we’ve put together five tips to help mitigate your business’ spreadsheet risk.
- Identify critical spreadsheets – In order to evaluate your company’s potential spreadsheet risk, you first need to establish the most critical spreadsheets of your business and the potential impact should there be an issue with any of them. From this, you can identify high-risk spreadsheets and make sure appropriate measures are taken to mitigate risk.
- Train end users – Ensure that the people who will be creating and using key spreadsheets have been effectively trained. While a certain amount of human error is to be expected, suitably training staff in spreadsheet management will help to significantly reduce risk.
- Test and optimise – Ask individuals to test your spreadsheet and provide feedback on it. User testing will allow you to better understand how a spreadsheet will be interacted with by users and therefore identify any issues and potential for risk.
- Retire outdated spreadsheets – One of the most common examples of spreadsheet risk is the circulation of multiple versions of one spreadsheet. Having several versions of the same spreadsheet can quickly lead to inaccurate data being used to inform further research, therefore leading to inaccurate data. You can help reduce this risk by ensuring that you retire spreadsheets once they are out of date.
- Lock important cells – Another common spreadsheet risk is unintentionally changing data, whether it be through deletion or replacing data from one cell with that of another. Make sure that you lock any vital cells to prevent important data being altered.
- Use simpler formulas – Avoid more complex formulas and hard-coding results into spreadsheets. If you’re consistent in how you use your formulas, identifying any potential errors will be much more straightforward.
- Back up critical spreadsheets – One of the simplest ways to make sure that your company’s spreadsheets are safe is to back them up regularly. Doing so will prevent a lot of trouble in the long-term, making data recovery much simpler and reducing potential risk considerably.
Spreadsheets are a valuable and powerful business tool, helping businesses better manage data and drive growth. However, as one error can have a huge impact on revenue and reputation, it is integral that spreadsheet risk is proactively managed. If effectively mitigated, businesses can invest more time into building the business rather than amending preventable issues.