A Google search on Microsoft Excel results in hundreds of websites that offer advice on Excel. There are hundreds of businesses that can teach you how to use Microsoft Excel and hundreds of thousands of YouTube videos explaining Excel tips and tricks.
Although there are software applications available for accounting, finance, data analysis, project management, and forecasting, Excel is a forerunner for these business functions. Most businesses want their managers to have a basic, if not advanced, understanding of Microsoft Excel.
Yet, there are dangers in relying too heavily on Excel, especially if the advanced understanding of Excel is unknown by the company’s management team.
In “Microsoft’s Excel Might Be The Most Dangerous Software On The Planet” Tim Worstall described when JP Morgan’s CIO (in 2012) called upon a quantitative analyst, “a London-based quantitative expert, mathematician and model developer”, to create a new value-at-risk model for a synthetic credit portfolio. The analyst’s “advanced” techniques involved copying and pasting data between several Excel spreadsheets. This manual process left room for error, several errors in fact, which cost JP Morgan several billion dollars.
Despite the availability of automated technologies to double check databases and equations (especially when dealing with billions of dollars), top management of large, public companies still rely on Microsoft Excel.
UK Regulators, the Basel Comittee on Banking Supervision (BCBS) and the Financial Services Authority (FSA), were quick to respond to the incident. In his article, Vic Daniels said the BCBS and FSA “made it clear that when relying on manual processes, desktop applications or key internal data flow systems such as spreadsheets, banks and insurers should have effective controls in place that are consistently applied to manage risks around incorrect, false or even fraudulent data.”
This is an eye-opening lesson for budding managers. A lesson in communication and how to oversee projects worth billions of dollars but also a lesson about understanding the tools a company uses and how they should be used in company projects. To me, the scenario illustrates an important reason for me to learn Excel. With Excel skills, I can create and manage my own projects as well as double check my team members’ projects to prevent errors such as JP Morgan’s. There are other tools that can be used for managing data but I’m going to start with Microsoft Excel.