October 7, 2024
Marketing Director
Mistakes in Excel spreadsheets. We’ve all made them, and studies show that nine out of ten spreadsheets (with more than 150 rows) contain errors. But when you’re managing a $1.5 trillion sovereign wealth fund, even the tiniest error can have massive consequences.
This is what happened to Norway’s giant fund when they discovered that roughly NKr980m (approx. USD $92m) was “missing” after an error was made relating to how it calculated its mandated benchmark.
According to Norges Bank Investment Management, a calculation error was discovered in the composition of the index the fund is measured against, and this led to a marginal overweight in US fixed income relative to global fixed income. Despite discovering and correcting the error, due to the enormity of the fund, the return was 0.7 basis points and subsequently the previously reported positive relative return of NOK 118 bn was adjusted down to NOK 117 bn.
Whether this is more of a reporting issue rather than the misallocation of funds is another matter, but perhaps the real scandal here is that Excel is used in the calculation for reporting on one of the largest pools of capital in the world.
Readers of our blog will know that in 2023 we listed “the worst financial services Excel errors of all time”. But it’s not just in finance that Excel errors are causing headaches.
In the science world, for example, Excel is widely used for genetics research. But Excel’s built-in auto-correct and conversion of data that look like date fields can cause untold chaos. Researchers have discovered since 2004, that Excel can mangle imported data which contains gene names, sample identifiers or accession numbers, into useless dates.
Back in 2021, the recruitment of trainee anesthetists in Wales was badly disrupted by spreadsheet failure. The Anaesthetics National Recruitment Office (ANRO) who conducted the recruitment drive, told all candidates they were unappointable, despite some people achieving the highest interview scores.
Later investigations discovered that multiple spreadsheets, which lacked standardization or proper formatting, were subsequently consolidated using data that was manually copied and pasted, all culminating in results that were woefully incorrect.
In 2019, the largest legal cannabis company, Canopy Growth, made a spreadsheet snafu by grossly underreporting losses due to a bad formula. The company filing stated its adjusted EBITDA loss at the end of 2018 as CA$52m (£39.6m), but in reality that figure was CA$155m (£88.5m). “The correction was made due to a formula error in the spreadsheet supporting the year-to-date adjusted EBITDA loss calculation,” Canopy Growth said later in a press release.
Excel errors have even been known to impact the movement of migrants across borders. Back in 2018, the Japanese government’s plans to pass an immigration bill were adversely affected by an Excel mishap. While the bill planned to open the door to 340,000 new foreign workers, research into why current foreign workers in Japan were dropping out of an existing work training program was skewed by spreadsheet errors. Japan's justice minister was later forced to apologize for the erroneous data, blaming an Excel issue.
Back in the financial world, where Excel errors are commonplace, it was reported that in 2022, Iceland mispriced its sale of some Islandsbanki shares due to a spreadsheet blunder. Apparently, a sheet omitted investors’ offers that had included “foreign commas or amounts defined as text” and although the outcome is disputed in the media there were reports of the shares being undervalued by as much as £16m.
While spreadsheets will always play their part in financial services accounting, when it comes to scaling a business and mitigating risk, automation is the natural alternative to reduce human error.
Engineered in Switzerland by private markets experts, qashqade guarantees accuracy, improves transparency and builds trust between GPs, LPs and their beneficiaries. It does this through an award-winning enterprise product suite that streamlines and automates fee and waterfall calculations and reporting for private funds, replacing manual processes and unstable spreadsheets. Get in touch today to see how.
