Today’s operating model: More and more spreadsheets?
In an era of digitisation and transformation, we appear to be increasing our reliance on spreadsheets.
Last year 40% of respondents claimed to be using spreadsheets for their whole-of-fund analytics and decision making, whereas today that number has risen to 55%. With more than one in two asset owners using Excel and other variants to form a consolidated view of investments and exposures (and even more firms amongst the super-user segments in pensions and in the Pacific region) there is cause for concern. Are we fully aware of and managing the risks, costs and scalability challenges associated with high and increasing levels of manual processing across a global industry?
Fortunately spreadsheets and their risks are not omnipresent. Amongst larger asset owners in North America, Europe and Australia, master custodians continue to play a central role in asset owners’ abilities, whilst in-house development remains the backbone for Asian asset owners’ exposure management today.
How are asset owners creating a whole-of-fund to view, execute and monitor decisions in 2023?
(% of respondents)
“But what is wrong with spreadsheets?”
“We discovered that we had been under-reporting our exposures for 8 years because of an issue in one of our spreadsheets”
The use of spreadsheets has its advantages, not least of all being cost. As we saw in our 2022 research, smaller funds (who manage simpler portfolios with lower asset bases), can easily run a “no-frills model” wherein the largely fixed costs of managing processing in spreadsheets typically offers better value.
Equally, spreadsheets are an indispensable “personal productivity” tool for many – offering users quick and simple analytics when a data point needs checking or reconciling.
The challenge is when spreadsheets become part of the core operating model – as they appear to be in asset allocation management (where 43% of respondents are using spreadsheets today) and in regulatory reporting (where a striking 67% are spreadsheet-based). In both of these areas, the compound risks of manual errors are significant. Without appropriate governance, a single error in a single cell can not only impact enterprise-wide decision making and exposure management, but it can also trigger regulatory compliance issues and potential sanction.
So why are spreadsheets still the go to solution for so many asset owners?
Many asset owners cite a lack of alternatives as a key driver in their levels of spreadsheets across the firm. In complex and fast-changing areas such as regulatory reporting, off-the-shelf solutions that cater for the full range of (changing) market complexities are harder to come by than in the portfolio management or valuation spaces, for example.
Equally, even those who do try to move away from spreadsheets towards more robust or automated platforms often cite the ‘post spreadsheet bounce back’ issue – especially in the asset allocation space. With few productised solutions available in many markets, asset owners are often compelled to repurpose existing portfolio-level platforms in order to run multi-portfolio analytics. Anecdotally this stretch rarely succeeds and can end up creating new work-arounds and manual (spreadsheet-based) solutions all over again.
In face of these challenges, are we doomed to remain in a continued cycle of spreadsheet removal, followed by creeping usage growth?
How are asset owners managing their core functions today?
(% of respondents selecting each technology per function)
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