Top 5 Risks From Excel-Driven Valuations

It can be daunting for a business to change its processes after years of working the same way.

Sometimes it’s just easier to stick with the tried and true, even at the risk of missing out on exciting advances or compromising productivity. In many cases the risks of not evolving operations outweigh the rewards, particularly when the credibility of businesses relies on accuracy and efficiency.

This is especially true for private capital firms. Despite the fact that valuation technology and outsourcing options are becoming more available to the private markets, the majority of firms are still running complex valuation models in Excel. Doing so not only effects efficiency, but it also puts the firm at risk of making costly spreadsheet errors.

Today, Alex Merola, a member of IHS Markit’s Financial Services group, explores the top five ways firms are exposing themselves to risk by continuing to utilize Excel spreadsheets during their valuation processes, and makes a case for finding a new and improved way of doing things.

Here’s an excerpt:

“Spreadsheets offer virtually no versioning capabilities, and associates who are pressed for time and working long hours don’t always conduct the due diligence required to validate the numbers. Having a process in place that prompts people to go back and look at the right numbers can help, but ultimately, the best practice is to set up a system that pulls in the right numbers automatically.”

Read the Special Report: The top 5 ways excel-driven valuations are exposing your firm to risk

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