“Spreadsheets plus human error can add up to disaster” ran a headline in The Times (April 9, 2018). It transpired that the collapse of Conviviality, where Bargain Booze and Wine Rack had lost £500m in three weeks, was down to human error or as they called it, an “arithmetic error” where someone had entered an incorrect line into a spreadsheet.
Other companies have suffered similar problems with spreadsheets, and some of these are household, FTSE 100 names. Not small, unsophisticated firms as one would perhaps assume. One insurance company, who was not named for perhaps obvious reasons, had devised a spreadsheet with over 4 million formulae. “Staggeringly complex” was the description used in the article since it was confirmed that with this scale, it was virtually impossible to be sure that there were no errors. The number one issue, it said, was people inputting data incorrectly, whether by incorrect copying and pasting into rows and columns or simply making errors when keying in. All too simple to do and obvious.
This is all somewhat dispiriting and worrying. It was six years ago in 2012 when the then FSA issued a statement that firms, especially in the insurance sector, would be expected to demonstrate “appropriate controls” with regard to internal data flows, such as spreadsheets. This statement followed a Basel Committee consultation paper from June 2012 that had identified that, due to the inherent potential risks of spreadsheets, firms should have effective controls and processes in place to mitigate these “unacceptable risks”.
To quote Jean-Baptist Alphonse Karr, “plus c’est la même chose”.
As the Times article, quite astutely observes, risk committees continue to consider the big macro themes such as Brexit or cybercrime, but tend to overlook the fact that “flawed, hairless apes get involved, inputting the wrong numbers”. Perhaps now is the time for change before a financial institution follows the road of Conviviality?
- 9 Apr, 2018
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- Insurance, Spreadsheet,