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Financial Services Report Highlights Spreadsheets as a Risky Business

Profitability and Reputation are at risk according to a recent report on Spreadsheet Management in Financial Services

Berkshire, Bracknell, UK – July 10th , 2006 – Actuate Corporation (NASDAQ: ACTU), the world leader in Enterprise Reporting and Performance Management Applications that empower 100% of users to achieve breakthrough corporate performance, has today announced the findings of a recently commissioned survey into the use of Spreadsheets amongst key financial services companies. The results were compiled following phone-based interviews with practitioners across a number of tier-1 and tier-2 banks, conducted on behalf of Actuate in June 2006 by Lepus Consulting, a specialist Financial Services Management Consultancy. The report focuses on 5 key areas; the extent of spreadsheet use amongst these banks, the processes and management of spreadsheets, the inherent risks and gaining control of spreadsheets.

Spreadsheets are a fundamental facilitator of the way in which financial services institutions conduct their business in the 21st century. However associated with this extensive use are a large number of inherent risks that can ultimately damage both the reputation and profitability of the business. This report therefore focuses on the breadth of spreadsheet use to gain an insight into current industry practices and in particular looks at the functions and purposes for which spreadsheets are used in the Front, Middle and Back Offices.

Amongst the top level findings the report highlights; -

The Extent of Spreadsheet Use

• Spreadsheets are used across all the functions of the front office. The most critical front office spreadsheets tend to be those used for trading purposes. Typically spreadsheets are used for pricing, valuation, risk and P&L calculation.
• Spreadsheets drive the reporting processes in the middle and back office. As a consequence, spreadsheets tend to be utilised as data aggregation tools, used to consolidate data that can then be ‘sliced and diced’ accordingly.

The Risks of Spreadsheet Use

• A lack of precision in use fundamentally undermines the integrity of many spreadsheets. Manual intervention, driven by complacency or undue haste, can cause huge problems in spreadsheet use, manifesting itself in incorrect copying and pasting and ‘blind’ spreadsheet linking. This can mean that a ‘single version of the truth’ cannot be maintained.
• Regulatory pressures are increasing – many of the banks interviewed see the need to stay one step ahead of the regulators as the key driver in enhancing spreadsheet management.

Management of Spreadsheet Processes and Environments

• A number of firms now operate a cross-business management committee to oversee spreadsheet management. However up to 50% of institutions still allocate responsibility to individual business units, where the strictness of control can vary substantially

Gaining Control of Spreadsheet Use

• Automated server-based generation eliminates human error. The introduction of automation to manufacture a spreadsheet from a defined blueprint circumvents many of the problems inherent with manual intervention
• Scheduled distribution drives effective spreadsheet use. Time to market demands that the distribution of spreadsheets is facilitated in a timely manner to ensure that business processes are not delayed by inefficient distribution procedures.

The full report examines some of the risks inherent in spreadsheet use and analyses the way in which financial services institutions are seeking to manage their spreadsheet processes. It also highlights how some of these issues can be overcome and to conclude, it seeks to identify the steps involved in defining best practices in spreadsheet management.

Vincent De Gennaro is VP EMEA at Actuate and comments, “Spreadsheets represent one of the most prevalent applications on the planet and are the reporting and analysis tool of choice for many professionals offering collaboration and information sharing. However despite their popularity, spreadsheets, used improperly or incorrectly or without sufficient control, pose a greater threat to a business than can be imagined.” Vincent adds, “This report from Lepus confirms our belief that spreadsheets are indeed ubiquitous and the challenge for organisations is to provide reasonable management of spreadsheets without removing the obvious benefits and disempowering users. That is exactly what we offer with Actuate e.Spreadsheet; a managed spreadsheet application platform that allows companies to address the unnecessary errors and associated risks caused by traditional spreadsheet use, while preserving intellectual investments.”