Spreadsheets play a critical role in business decision making globally

Capitalism's Dirty Secret

Author:

Kenny Whitelaw-Jones

Published:

22 May 2015

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Grenville Croll, a leading spreadsheet risk commentator, said, “Spreadsheets have been shown to be fallible, yet they underpin the operation of the financial system. If the uncontrolled use of spreadsheets continues to occur in highly leveraged markets and companies, it is only a matter of time before another ‘Black Swan’ event occurs causing catastrophic loss.”

At F1F9 we’ve long viewed spreadsheets as Capitalism’s Dirty Secret. So that’s what we called our research report – It delves into the detail of the problems senior decision makers face, when trying to work with spreadsheets, the experiences they encounter, and their underlying issues with spreadsheet implementation.

Many people know that there are deep-seated systemic problems, but nobody is talking about them.

We commissioned YouGov to undertake research to obtain empirical data about how spreadsheets are being used in business. Although the research was conducted with the help of over 1,200 UK-based senior managers and above, we suggest the results apply globally.

The data supports what we see in the market every day:

Spreadsheets play a critical role in business decision making globally.

Many businesses don’t understand the risks they are exposed to, under-invest in spreadsheet training and don’t adhere to best practice. Lack of training is leading to direct financial loss, poor decision making and employee stress.

The report provides key findings from the research and also provides an analysis of some of the problems Enron faced with its spreadsheets and procedures.

Felienne Hermans, of Delft University of Technology, published a research paper containing her analysis of 15,770 spreadsheets used in Enron. She kindly shared some of these findings in our report.

These spreadsheets researched were obtained from the Enron Email Corpus, which is a database of over 600,000 emails generated by 158 employees of the Enron Corporation. These emails were acquired by the Federal Energy Regulatory Commission during its investigation after the company’s collapse, and are publicly available. These emails were not voluntarily handed over but gathered for evidence. They therefore allow a unique insight into a large organisation’s email and spreadsheet behaviour.

Some of the startling facts of this research are below:

– The group of 158 Enron employees were emailing approximately 100 spreadsheets to each other per day.

– 10% of the 600,000 Enron emails studies were about spreadsheets.

– 24% of Enron spreadsheets with formulas, contained errors.

– On average, erroneous cells in spreadsheets have 9.6 other formulas depending on them.

– Of the 68,979 Enron emails which discuss spreadsheets, 6% contain words related to errors.

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Kenny Whitelaw-Jones
Kenny Whitelaw-Jones is no longer with F1F9 but we really like this blog so we've kept it.