Friday, March 1, 2024

The Bank of Norway lost 86 million euros due to an Excel error

Some mistakes are expensive. Last year, the Norwegian sovereign wealth fund lost 980 million kroner, or about 86 million euros, due to a simple calculation error caused by a wrongly placed box in its large spreadsheet. A human error caused millions of dollars in losses and once again shows how a lack of controls and reviews can have a huge impact.

Through the Financial Times, we discovered the details of this story. Norges Bank explained that in February, they found an “error in the calculation of the composition of the index.” Once the problem was discovered, they reversed it, but due to the huge size of these national funds, the effect was “0.7 points,” which forced the profits to be reduced from about 118 billion Norwegian crowns to about 117 billion crowns. In the specific difference of 980 million crowns.

Spreadsheets are very important

If this small error had occurred in other accounts, the difference would not have been so significant. But in national funds where an extraordinary amount of resources are operating, any deviation is highly relevant in absolute terms.

What happened to this miscalculation? A simple human error. A wrong click.

As described in an internal report, the source was an employee called “Simon.” The description is valuable:

“My worst nightmare. It was a manual error. My mistake. I used the wrong date, December 1 instead of November 1, because it was marked.”

The mistake wasn’t discovered until a few months later, because the year-end numbers didn’t match. The problem was quickly identified and corrected, but the damage was already done.

The report described how Patrick du Plessis, head of risk monitoring at the Norwegian national fund (NBIM), felt “bodily sick” when he was told what had happened.

The history of this excel error is a lesson for Norwegian fund managers. Nicolai Tangen, its CEO, explained at a conference in January 2024, how a “decimal error costs about 900 million.”

And its impact. As the manager himself described it: “Imagine you came home from work one day and discovered that one mistake cost 40 hospital beds, 80 football fields, and a tunnel on the west coast.”

Anyone can make mistakes

The most surprising thing was probably the reaction. “Simon” was not fired. As explained by NBIM, this error makes them more aware and if it is resolved quickly it will be because “no one tried to cover it up and no heads were cut off.”

For example, the email that “Simon” and Patrick du Plessis received when it all happened from the CEO:

These things happen! We run a complex operation, and what surprises me the most is that historically, we have had very few if any incidents like this. Both of you are super professionals and important contributors to the success of NBIM.

Don’t let it ruin your weekend.

Patrick du Plessis is currently working as a risk manager at the Norwegian national fund.

World Nation News Desk
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