For the love of God! Not Excel!!!

Data is the most important asset that any business owns.?Huge benefits accrue to any business that manages its data properly.?On the flip side, there are significant risks for any business that doesn’t.

SM&CR data is no different.

All firms need some form of systematic approach to the management of SM&CR data.?This is self-evidence from a reading of the SM&CR regulations.?FSMA section 63F(7) and SYSC 27.2.13G require firms to maintain a record of every employee who has a ‘fit and proper’ certificate.?SYSC 2.2.1R requires firms to keep a record of the way in which Senior Manager responsibilities have been apportioned within each firm.?SYSC 22.9.1R requires firms to keep “orderly records” of fit and proper testing and disciplinaries for the purposes of responding to regulatory reference requests.?SUP 10C.11.22G requires all firms to keep current and past versions of Statements of Responsibilities as part of their regulatory records.?SYSC 25.8 requires enhanced firms to keep all current and past versions of the Management Responsibilities Maps.?The list goes on.

So, whether we like it or not, all firms that are subject to the SM&CR are faced with a classic ‘buy or build?’ conundrum.?Do you ‘buy’ a system to help you comply with your SM&CR recordkeeping obligations, or do you ‘build’ one?

To me, the choice is an obvious one.?Whatever your line of business, the creation of SM&CR compliance systems is not core to it.?Staff time is a valuable and finite resource which should be focused on those activities which contribute most to the achievement of overall corporate objectives (if you have ever wondered just how valuable, check out our employee cost calculator). Why choose to build, and if you do choose to build, why persist with Excel?

In fairness, Excel does have some things going for it.?It is a flexible and familiar way of organising information which incorporates decent analytical functionality.?It certainly requires less technical expertise than, say, Access in order to implement.?Some will claim that it is free (or at least cheap) but, on that, I beg to differ.?SM&CR is scattered across about 700 pages of the FCA Handbook.?It documents a whole myriad of requirements – from statements of responsibilities to management responsibilities maps; from delegations to handover notes; from fitness and propriety to regulatory references, from disciplinaries to conduct rules breaches.?Are you really going to undertake to model (and then maintain) all of this in an Excel spreadsheet (or, god forbid, a series of separate Excel spreadsheets)??How long will that take??What’s your time worth?

Even putting the value of time to one side, in the context of managing SM&CR data, the advantages of Excel pale into insignificance against its disadvantages.

Beyond the fact that it essentially provides a very ‘flat’, non-relational view of data, Excel is not well-suited for use as a collaborative compliance tool.?One master copy of a spreadsheet is required for data integrity purposes – making multiple user access largely impossible to achieve.?Individual users can ‘check out’ a shared spreadsheet, but this does not represent true collaboration.?Stored locally, they are easy to misplace.?Typically shared via email, they run a real risk of eventually ending up in the wrong hands.

Password protection can help to secure the contents of a spreadsheet from the OUTSIDE world.?However, a lot of SM&CR data is confidential (think criminal records checks, disciplinaries and financial information) and should be restricted to those with a genuine “need to know” WITHIN the organisation.?There is precious little within Excel to assist on this front.?Put simply, anyone with the password to a spreadsheet has FULL access to its contents.

The performance issues associated with Excel are also legend.?As the amount of data stored increases, Excel begins to lag badly.?If you are a firm of any size, you will undoubtedly experience its capacity limits before too long – it quickly gets left behind.

However, perhaps the greatest Excel disadvantage of all lies in spreadsheets themselves.?Whilst Excel as a program is robust, spreadsheets are extremely fragile.?Often created by individuals lacking true technical expertise, Excel spreadsheets break all of the time – they just don’t tell you that they have done so!?Even those that are in working order suffer from a near-fatal weakness to the “fat finger” syndrome.?Given enough time, it is near certain that a user will accidentally delete data contained within a spreadsheet, inadvertently save over existing data or type the wrong thing in the wrong cell at the wrong time.?Data formatting and validation can help mitigate this risk, but it’s difficult to enforce over the longer term as it too can simply be deleted by the (typically accidental) press of a key.?This makes data integrity almost impossible to achieve – a problem exacerbated by the lack of a proper audit trail or true version control.

The limitations of Excel are real.?It’s easy to find examples of firms who have found this out to their cost and embarrassment:

• Formula errors in an Excel-based VAR model contributed to the USD 6 billion losses suffered by JP Morgan during the “London Whale” episode.?In simple terms, the spreadsheet should have calculated a VAR number by dividing by the AVERAGE of two numbers.?Instead, it calculated the VAR number by dividing by the SUM of those two numbers.
• Uncontrolled cutting and pasting into a spreadsheet was identified as the culprit in TransAlta’s USD 24 million loss when hedging power contracts in 2003.[1]
• Accidentally ‘hidden’ rows in a spreadsheet led Barclays Bank to unwittingly accept the transfer to it of 179 unprofitable contracts during its purchase of Lehman Brothers in 2008.
• Input errors resulted in organisers of the London Olympics selling 10,000 tickets too many to the sychronised swimming event (someone typed in a “2” instead of a “1”, indicating that 20,000 tickets remained rather than 10,000).
• Inherent capacity limits resulted in the loss of almost 16,000 Covid test results in 2020 as .csv test result outputs were transferred onto spreadsheets.[2]

Don’t let this be you.?Excel is a fantastic calculator, but it is not a database.?Neither is it a free lunch.?Is building and maintaining a spreadsheet a good use of your time??Will it actually save you money in the long term??Will it result in a robust approach to SM&CR compliance??Is it really the face that you want to show the FCA??If you have answered “no” to any of these questions, drop us a line and we can show you some infinitely better alternatives.

[1] https://www.theregister.com/2003/06/19/excel_snafu_costs_firm_24m/

[2] https://www.theguardian.com/politics/2020/oct/05/how-excel-may-have-caused-loss-of-16000-covid-tests-in-england