The Enterprise Spreadsheet: Pushing Toward Transparency Executive Summary The spreadsheet has always been a shape-shifting application. The financial equivalent of a blank page has allowed end users to adapt the application to any imaginable use. In the trading world, Microsoft® Office Excel® is the modeling laboratory, negotiation tool, trade capture software, books and records, and an input into almost every post-trade process. It has and will always be the workhorse of the desktop. But, the inherent individualism of the spreadsheet can be a negative in the current environment, as firms want to impose tighter

The challenge facing capital markets’ IT departments is implementing all of these processes without impacting the effectiveness of the front office. The front office needs to be able to respond to clients’ needs while adjusting to changing fiscal and regulatory realities. Neither investors nor regulators have forgotten how easily rogue traders can bring about staggering bank losses. Operational risk will be elevated to a top-line concern—just as much a priority as revenue, reputation and regulation. The goal is transparency: We can only respond to what we can see. Thus, at every level, every proprietary model, strategy or application will be not only monitored and documented (e.g., content management), but managed through specific controls and process checks. The process is one of identifying, validating, monitoring and quantifying. The course from front to back office should be an easy one, rather than a drag on productivity.

The decision to introduce tighter IT controls on a product, or perhaps move a function to a formal business application, is not so straightforward. In addition, the three types of improvement (interface, storage, computing) will differ not only according to the point in the process but also according to the product itself.

Most firms would agree that there are basic spreadsheet management capabilities that should apply to all spreadsheets of financial import, such as authentication and auditing. Unfortunately, the decision about whether to introduce tighter IT controls can be quite subjective. As an example, TABB Group discusses four factors of an investment vehicle that should be considered when determining the level of control to be implemented: Number of events, contract characteristics, error rates, and notional exposure.

It is easy to say that firms should always strive to improve the trade workflow. However, at a time when tens of thousands of people are being laid off from the Capital Markets industry, the cold reality is that the coming years promise declining revenues, fewer new products and less innovation. Companies will rely on making incremental improvements to existing architectures and processes. It is a time when we need to build on what we have, rather than try to start from scratch.

The TABB Group Vision Note on the Enterprise Spreadsheet:
Pushing Toward Transparency

This TABB Group Vision Note discusses the changing market and regulatory environment facing capital markets participants, the likelihood of new reporting requirements on transactions and risk positions and how firms are continuously redesigning Excel to adapt to current realities. It also discusses key concepts that will be incorporated into spreadsheet management, including auditing, authentication, the use of dynamic-link libraries and other remote code, passive monitoring and high-performance computing.  It is based on conversations and data obtained through interviews with technologists and business users at global investment banks, asset management companies, hedge funds and independent IT consultants.