Study Shows Spreadsheets Can Increase Data Quality Risks for Corporate Reporting

June 16th, 2008

Be careful with uncontrolled use of spreadsheets to track and manipulate corporate data. Spreadsheets can become a huge problem for companies that have regulatory reporting requirements or planning requirements, according to a KMPG study. The study concluded that the basis for as many as 95 percent of financial models were flawed. Spreadsheets that collect and manipulate data were deemed inadequate to save companies from corporate risks associated with data quality.

I just finished reading an article in Information Age about analysts at market intelligence company, The Data Warehousing Institute (TDWI), which in 2007 set out to investigate the uncontrolled use of spreadsheets by end-users when undertaking data analysis tasks.

The findings make for sobering reading: of the 200 companies surveyed, including companies of all sizes and from a wide range of industry sectors, 90 percent reported that they were living with the problem of so-called spreadmarts. Spreadmarts are shadow data systems that extract, transform and format data and publish reports.

If you have EHS reporting requirements or if your CSR reporting goals will be measured, you can’t afford to have data aggregated from separate PCs across the enterprise. You must have an integrated platform to collect, analyze and report out uniform data.

In case I haven’t alerted you sufficiently, the article highlights the experience of a major U.S. utility that hiked consumer gas prices by between $200 million and $1 billion due to a mistake in a spreadsheet file. In another example cited in the article, a U.S. mortgage company was forced to write down $2.4 billion in mortgages due to a change control error in a spreadsheet. Spreadsheets over 200 lines long are almost guaranteed to be flawed.

Companies continue to allow employees to take corporate data out of their primary systems, massage it and write it back to a core transactional system because it is very hard to stop that process. We are trying to alert the key decision makers worldwide about the risks associated with inconsistent and poorly manipulated data and encourage the use of an integrated data collection and management platform to reduce the associated complexities, costs and risks.

Tags: csr reporting data quality risks ehs reporting information age kmpg spreadsheets

Entry Filed under: Operational Risk Management, Sustainability, Corporate Responsibility