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Software & Systems

Excel Still Excels in Forecasting, Risk

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March 28, 2017

Amid the latest high-tech treasury tools Excel hangs in at the top.

Abacus SidewaysThere’s no question today’s treasury management systems offer a lot of functionality, from giving treasurers eyes on cash in far-flung locales to managing the cash portfolio. But despite the millions spent on such systems Excel still is a oft-used tool among FX managers when it comes to exposure forecasting and risk analytics.

In a pre-meeting survey for a recent meeting of the NeuGroup second FX Managers’ Peer Group (FXMPG2), it was revealed that nearly 90% of members used the humble spreadsheet for risk analytics. Meanwhile, a little more than 70% of members used Excel spread sheets when it came to forecasting balance sheet exposures and a bit more than 60% used them for revenue/expense exposure forecasting.

Although actual figures are hard to come by, there are reports floating around the internet that 88% of all spreadsheets contain errors and 50% of spreadsheets used by large companies have material defects. One infamous Excel error was revealed in an operational review by JP Morgan Chase. The bank found that a model used amid the “London Whale” fiasco “operated through a series of Excel spreadsheets, which had to be completed manually, by a process of copying and pasting data from one spreadsheet to another.” That blunder cost billions. And according an investigating by modeling company F1F9, lack of a minus sign cost Fidelity Magellan Fund around more than $2 billion in 1995, and a sloppy assessment of bids for a rail line in the UK was estimated to have cost around $76.6 million.

Such mistakes can be avoided by assiduous checks and double checks. They can also be avoided by teaming with a third-party provider. To that end, there are many applications that FX managers use to enhance their Excel experience, including FiREapps, Atlas, Kyriba and Hyperion, among others. Chatham, Reval and Hedge Trackers were also prevalent in the mix.

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