Spreadsheets - Seriously Risky!

You've all heard of The London Whale, right?  The dude(s) at J.P. Morgan's Chief Investment Office in London who managed to lose $6 Billion on botched investments?
The gory details on what happened are out, and they are dry - seriously dry - reading.  But there is one part that stands out - the role of spreadsheets in all this.
From FT Alphaville -

[...] the model operated through a series of Excel spreadsheets, which had to be completed manually, by a process of copying and pasting data from one spreadsheet to another[...]

Yeah, you got that right.  Our Financial Overlords use Excel and copy/paste in their overlord-ian activites.  (We are so doomed)
You pretty much know where this is leading, right?

an operational error in the calculation of the relative changes ... [s]pecifically, after subtracting the old rate from the new rate, the spreadsheet divided by their sum instead of their average, as the modeler had intended.

Brilliant.
Turns out that this was a key part of the franken-sheet, that was responsible for telling them how risky their investments were (larger was worse)
And they divided the number by the sum instead of the average.
Like I said, Brilliant!

We really, really are doomed.

On that note, its worth pointing out that there is an organization called The European Spreadsheet Risk Interest Group, which - you guessed it - deals with spreadsheet related risk management.
Mind you, the very fact that something like this exists is deeply frightening to me.
Regardless, their list of horror stories is informative, and should cause you to lose no little amount of sleep.
Examples include
Mouchel -->

An accounting error yesterday forced outsourcing specialist Mouchel into a major profits warning and sparked the resignation of its chief executive.

Richard Cuthbert stood down as analysts warned the firm was in danger of breaking banking agreements on debt after it had to reduce full-year profits by more than £8.5million to below £6million.

The mistake was not Cuthbert’s, however, but an outside firm of actuaries. It told the company on Wednesday that a spreadsheet error meant a pension fund deficit had been wrongly valued. As a result, Mouchel had to write down profits by £4.3million.

Morgantown -->

Morgantown City Clerk Linda Little said a computer error led to a discrepancy in vote totals for council candidate George Papandreas.

The candidate -- who was defeated by incumbent Ron Bane -- actually received 99 more votes than was originally indicated in the total ..

Little said election officials had put the total number of votes for each precinct into a Microsoft Excel spreadsheet. The computer program skipped over an entry when it added the totals, she said.

Nevada -->

The Nevada city budget spreadsheet apparently worked correctly until sometime in late December 2005 when, city finance director Ron Chandler says, it developed a problem, causing the 2006 budget to show a $5 million deficit in the water and sewer fund. Chandler said that it took him most of the day Wednesday to fix the problem. While he was working on it he found some other errors in the spreadsheet that needed to be corrected

And the list goes on.  Go check out the original