Lessons From Europe

Home/Financial Modelling/ Lessons From Europe

Lessons from Europe

How the Debt Crisis can Improve Your Management Reporting & Modelling

By Jeff Robson

Lessons from Europe: How the Debt Crisis can Improve Your Management Reporting

You can’t have missed events in Europe this year as the Eurozone countries grappled with an unprecedented sovereign debt crisis. The ripples of which have been felt across the globe.

It’s safe to say that no one quite knows what will happen to Europe in 2012. And when the world’s leading economic experts can’t predict the fate of the world’s largest borderless market, it’s no wonder investors are spooked.

As the debt contagion spread like wild fire from Greece and Ireland to Portugal and Spain, even Italy (the world’s third largest bond market) got burnt. Serious questions were even asked about the exposure of French and German banks.

As this uncertainty continues, the very heart of Europe appears to be at risk. What seemed at first like an uncomfortable case of heartburn has turned out to be a serious cardiac episode.

Will the patient survive? It’s genuinely hard to say. But many commentators have been quick to call the European single currency a failure.

So what has the European debt crisis got to do with your management reporting?

Well the amazing thing about this crisis (and here’s where the lesson comes), it never had to be like this – it could have been prevented.

Yes, some countries have serious issues and needed to get on top of their debts, tighten belts and generally become more competitive. And, yes, the restructuring of Europe towards closer financial integration (which now seems inevitable), was a necessary adjustment.

But instead of dealing with the problem, European politicians tried weak, short-term attempts at solving the crisis. Sticky plasters were chosen instead of relatively painless, preventative surgery.

Instead of putting in reliable, robust, well supported measures and implementing them quickly (like you should with good management reporting), political leaders created half-hearted workarounds.

Spreadsheet workarounds (to bridge the gap between a reporting requirement and the current reporting functions) are just like the political workarounds created in Europe. At the time they seem enough, but in the long-run, poorly thought out, ad hoc spreadsheets hide a multitude of sins – and they can come back to bite you hard. Just ask Angela Merkel.

So the key is to focus time and resources into developing flexible reporting solutions that work in the short-term. Solutions that respond as business priorities rapidly change.

The problems that result from over-reliance on spreadsheet workarounds are large and often silent killers:

  • Lost productivity as time is wasted manipulating spreadsheets. Management in particular spend far too much time finding the right information, rather than making good decisions with it.
  • There are difficulties reconciling spreadsheets created by different people and departments.
  • Bad decisions are made and no one realises the cause (poor spreadsheets) until it’s too late.

It’s not easy to build flexibility into your management reporting. It’s why even big companies struggle to stay ahead of the curve.

Our business is building robust financial and non-financial spreadsheet models that give your managers the information they need, when they need it.

And, importantly, our models are not just about helping you in the short term (although they will), they often become or form the foundation of your permanent management reporting structure.

So if you’d like to have better models in your business, just hit reply or give us a call on +61 8 6210 8500.

Now, can anyone change up some leftover Euros I have? No? I didn’t think so.

2017-03-08T03:54:04+00:00 Financial Modelling|