Five reasons spreadsheets are not a suitable risk management tool
For the start-up entrepreneur, a spreadsheet can seem like a great a way to capture key data, manage risk and spot the most profitable opportunities. But as a business grows into a flourishing SME and then into a prominent national or international organisation, a spreadsheet simply can’t rise to your risk management needs.
We explain some of our key concerns about the UK’s still-prominent use of spreadsheets for risk management. And it’s not all about scaremongering. Although risk management is crucial for avoiding business catastrophes, it’s also key to spotting profitable trends and increasing your turnover. In fact, a 2012 Ernst & Young study found EBITA (earnings before taxes, depreciation and amortization) tripled when firms moved to dedicated risk management software.
The human is central to the spreadsheet. You dictate what data you enter, how accurate the figures are and whether you choose to acknowledge or ignore the red flags. Meanwhile, more mature risk management software scans real-time data and validates it at entry so you can be certain it’s consistent and accurate.
Many risk management software providers operate using cloud technology or perform regular data backups so you can enjoy peace of mind that your information is safe and secure. It’s up to you if you backup your spreadsheet, and even the most proactive professionals often neglect to run frequent backups when other essential business tasks take over.
Endless integration battles
If you build your business on the basis of spreadsheets, you’ll likely find you have several spreadsheets across multiple departments and for diverse purposes. Trying to compile this information can be a real headache, and the risk of human error is high. Starting with intelligent risk management software means all your data is stored in one convenient place, and easy user interfaces make it simple to isolate the relevant information you may otherwise store in separate locations anyway.
Clouded audit trails
Spreadsheets can make it difficult to identify the source of data or calculations, and sharing the most up-to-date version can mean multiple file names and tedious data transfers. Sharing access to a single system with a built-in verification system and automated risk calculations using standardised metrics removes the stress and helps you focus on more important matters.
If you can’t trust or share your data, you’re certainly not going to be able to make important strategic decisions based on the information collected. Recommendations are a key part of innovative risk management software, helping you reallocate your resources to boost your productivity and build on your strongest relationships with suppliers, customers and stakeholders. When you want to make the best possible decisions for your firm, you need transparent data and clear projections. Which makes risk management a worthwhile investment.
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