BigLaw manages risks of all kinds. Records retention and discovery are the new biggies, but let’s not forget conflicts and insider trading, among others. Now, firms can consider a new risk.
Common Spreadsheet Errors Can Be Found With More Testing, Some Double-Checking (6/13/05) in the Wall Street Journal reports that an academic researcher has found that there are “undetected errors in about 1% of all spreadsheet formulas… some of those errors are big — big enough to impact a decision.” For example, the researcher says that companies have had to restate earnings because of spreadsheet errors.
Law firms check written work carefully – a 1% error rate would not be acceptable. I’m not sure the same is true for spreadsheets. My sense is that, partially because spreadsheet skill is relatively rare in BigLaw, the QC is not as rigorous as for written work. Even where BigLaw relies on outside experts’ spreadsheets, the potential for error exists. Spreadsheet error can even affect law firm business decisions such as proposed client budgets or practice group profitability analysis.
This risk may not be particularly worrisome, but those lawyers and technology support staff who work on spreadsheets should at least be aware of the issue.