When Citisoft is hired to do a Strategic Assessment, we take a look at our client’s organizational model, the tools they use, and the pain points they encounter. Sometimes we are called upon because the client has experienced an unfortunate issue, such as a large error or a bad audit. Often though, our clients want to be more competitive and realize that their operational and technology infrastructure is impeding growth.
After Citisoft interviews the players and examines the client’s processes and tools, what is our most common finding? Excel is being used everywhere to supplement the investment management tools the firm has deployed. We often joke that Excel is the most-used tool in our industry!
While this might have been expected 10-15 years ago, we’re often surprised by the prevalence of Excel with so many newer technologies available. But, let’s face it: Excel is an excellent tool. There are a multitude of investment management tasks you can perform using Excel, including complex calculations to supplement the accounting system, calculating and producing client bills, maintaining GIPS composites, assisting in Risk Management, or facilitating Order Management.
At Citisoft, we are familiar with a wide range of technology that is designed to aid investment managers in the front, middle and back office. We work closely with our clients to define their requirements, identify the right tools for their specific business needs, and help them implement the ‘right size’ solution. But when we encounter a smaller firm that decides purchasing and implementing industry tools is cost-prohibitive, then we feel a responsibility to help them understand one of Excel’s biggest shortcomings—operational risk.
If using Excel as a primary tool for critical data, you need to make sure your calculations are reviewed, locked down, documented, backed up, and periodically audited. It is easy to be lulled into complacency because some Excel superstar solved a problem by whipping up a spreadsheet to handle margin calculations, to net currencies on today’s YEN trades, or to rebalance a portfolio. However, you will wish you had taken a closer look and maintained control when suddenly the plus sign was supposed to be a minus, or an errant ‘cut and paste’ got in your cell! Many of these errors can be more than a minor setback—they can cause major regulatory, client, or financial issues.
We’d never advocate throwing Excel out the door, but caution management to ensure proper oversight, control, and audit of any business processes that are living in a spreadsheet.