Authors
Jason Rose
Abstract
Human error is part of everyday life in the business world. But when errors occur in complex financial models, the consequences can be disastrous.
A spreadsheet mistake in October 2003 required Fannie Mae to restate its unrealized gains by an amazing $1.2 billion — shortly after it had announced third-quarter earnings. In another case, a simple spreadsheet error caused a company's stock price to tumble so dramatically that trading was halted.
The ugly reality: Similar errors exist in a high percentage of business-critical financial spreadsheets. And these spreadsheets are what organizations rely on to track and calculate their business performance and report it to both management and stockholders.
Making matters worse, human errors in Excel-type spreadsheets—resulting from things like incorrectly built formulas or mistakes in cutting and pasting—are often proliferated and exacerbated when users attempt to link or consolidate workbooks.
Sample
Pragmatic steps that organizations can take to better protect themselves from the unintended impact of human errors include:
- Using industry-standard databases to manage and consolidate large volumes of data.
- Centralizing process control, workflow management, and user security.
- Standardizing business rules in a methodology library.
Publication
2007, Strategic Finance, March, pages 53-55
