A Historical Account Of Spreadsheet Mishaps

There are MANY reasons why companies are moving away from Excel, but the largest one is increased financial risk. Companies simply cannot afford to the effects of fatal spreadsheet errors. The smallest clerical error can have the largest impact, so it doesn’t take a big stone to create a tidal wave.

Fidelity’s Magellan Fund learned this the hard way, by projecting they would make $4.32 per share. However, this turned out to be false, as an accounting error in excel resulting in the omission of the minus sign on a net capital loss of $1.3 billion. As a result, the estimate spreadsheet was only off $2.6 billion dollars.

The scariest part, is that this sort of thing happens all the time:

  • TransAlta loses $24M over a simple “cut-and-paste” spreadsheet error
  • Fannie Mae discovers a $1.136B error made in a spreadsheet
  • The London Whale suffers a $6B trading loss via a (VAR) Value at Risk model containing standard Excel flaws

The list goes on. The impact of errors such of these not only impacts a company’s finances immediately but also hurts future business. With the ease in which information is accessed and shared amongst consumers, it can be almost impossible to bounce back from bad PR.

Often times, financial officers worry about the cost of implementing new platforms into their business. Yes, some options are very expensive. However, as a consumer, you have choices. You can have a customized platform built from scratch, you can use an out-of-the-box platform and work your business around it, or you can hire a team to customize an out-of-the-box platform so that it works around your business. The only option you can’t afford, is to continue to rely on spreadsheets.

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