Category: Operational Risk

The Supply Chain Crisis: How We Got Here

Mary Pat Campbell
The Supply Chain Crisis: How We Got Here

Link:https://www.nakedcapitalism.com/2021/10/the-supply-chain-crisis-how-we-got-here.html

Excerpt:

Nevertheless, the motivations for outsourcing IMHO are not properly understood. In the auto business, which is typical of a lot of US industry, direct factory labor cost is 11% to 13% of product cost. The offsets against that are greater supervisory and coordination costs (longer shipping times and financing costs, and with that, greater risk of being stuck with inventories related to products that aren’t selling well) and just plain old screw ups due to having more moving parts.

In other words, outsourcing is better understood as a transfer from factory labor to managers and executives, at the cost of greater operational risk.

Author(s): Yves Smith

Publication Date: 11 Oct 2021

Publication Site: naked capitalism

Banks Share Data to Block Cyberattacks

Mary Pat Campbell

Link:https://www.wsj.com/articles/banks-share-data-to-block-cyberattacks-11632389402

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Excerpt:

Competing banks are cooperating more than ever before to beat cybercriminals.

As the number and sophistication of cyberattacks jumps, financial firms are sharing more threat intelligence with each other, according to the Financial Services Information Sharing and Analysis Center, a nonprofit group that facilitates the exchange of cybersecurity intelligence.

This collaboration has thwarted a number of attacks in the past year, bank executives say.

In September 2020, Santiago, Chile-based Banco Falabella became concerned it would soon come under attack by hackers.

Distributed denial of service attacks, which flood servers with traffic to shut down websites and applications, were rippling across the financial sector as part of a long-running extortion campaign. Meanwhile, certain criminal gangs were besieging Latin American companies in particular with ransomware attacks.

Author(s): James Rundle

Publication Date: 23 Sept 2021

Publication Site: WSJ

Jim Dey | After a year, Teachers’ Retirement System’s dirty laundry put on display

Mary Pat Campbell

Link: https://www.news-gazette.com/opinion/columns/jim-dey-after-a-year-teachers-retirement-systems-dirty-laundry-put-on-display/article_f9668f4b-1a9f-512f-b2b4-e04a58b7b08d.html#new_tab

Excerpt:

There was a personnel earthquake in the summer of 2020 at the Teachers’ Retirement System in Springfield.

Ultimately, five high-ranking employees were removed from their positions, including executive director Richard Ingram. The tumult generated clouds of uncertainly that only recently started to clear, revealing improper and possibly criminal behavior.

Although mum at first, TRS officials recently released their first lengthy statement about what occurred, disclosing that a new employee purposely maintained a conflict of interest that he falsely claimed to have ended.

…..

The OEIG report states the scandal dates back to 2018, when the TRS “began the process of constructing a new pension system that it called the Gemini Project.” Urbanek said the Gemini system recently went online.

That required hiring outside information technology professionals. Singh and his company — Singh 3 Consulting — were initially hired as a contractor. But in 2019, the TRS hired Singh as a permanent employee, the hiring predicated on Singh terminating his relationship with his company.

He told the TRS he had done so. But no one apparently ever checked, because subsequent investigations revealed Singh remained president and chief executive officer.

Author(s): Jim Dey

Publication Date: 12 September 2021

Publication Site: The News-Gazette

Excel autocorrect errors still plague genetic research

Mary Pat Campbell

Link: https://cosmosmagazine.com/science/biology/excel-autocorrect-errors-still-plague-genetic-research/

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Excerpt:

Earlier this year we repeated our analysis. This time we expanded it to cover a wider selection of open access journals, anticipating researchers and journals would be taking steps to prevent such errors appearing in their supplementary data files.

We were shocked to find in the period 2014 to 2020 that 3,436 articles, around 31% of our sample, contained gene name errors. It seems the problem has not gone away, and is actually getting worse.

Author(s): Mark Ziemann, Deakin University and Mandhri Abeysooriya, Deakin University

Publication Date: 27 August 2021

Publication Site: Cosmos magazine

Intro to Financial Modelling – Part 19: Wrap-up

Mary Pat Campbell

Link: https://www.icaew.com/technical/technology/excel/excel-community/excel-community-articles/2021/intro-to-financial-modelling-part-19

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Excerpt:

There has been significant disruption in how organisations conduct business and the way we work over the past year and a half. However, financial modellers and developers have had to continue to build, refine and test their models throughout these unprecedented times. Figure 1 below summarises the areas we have covered in the blog series and how they fit together to form the practical guidance of how to follow and implement the Financial Modelling Code.

Author(s): Andrew Paw

Publication Date: 19 August 2021

Publication Site: ICAEW

Autocorrect errors in Excel still creating genomics headache

Mary Pat Campbell

Link: https://www.nature.com/articles/d41586-021-02211-4

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Excerpt:

In 2016, Mark Ziemann and his colleagues at the Baker IDI Heart and Diabetes Institute in Melbourne, Australia, quantified the problem. They found that one-fifth of papers in top genomics journals contained gene-name conversion errors in Excel spreadsheets published as supplementary data2. These data sets are frequently accessed and used by other geneticists, so errors can perpetuate and distort further analyses.

However, despite the issue being brought to the attention of researchers — and steps being taken to fix it — the problem is still rife, according to an updated and larger analysis led by Ziemann, now at Deakin University in Geelong, Australia3. His team found that almost one-third of more than 11,000 articles with supplementary Excel gene lists published between 2014 and 2020 contained gene-name errors (see ‘A growing problem’).

Simple checks can detect autocorrect errors, says Ziemann, who researches computational reproducibility in genetics. But without those checks, the errors can easily go unnoticed because of the volume of data in spreadsheets.

Author(s): Dyani Lewis

Publication Date: 13 August 2021

Publication Site: nature

Virtual Meetup: To Err is Human but to ISERR is Never OK!

Mary Pat Campbell

Video description:

Have you ever built a perfect financial model without any errors? Thought not! And for that reason, all good modellers know they need to include some error checks. But what is not as clear is how many error checks you should have, when you should include them and what form they should take. Excel “helpfully” provided us with functions like ISERR, ISERROR and IFERROR but as you progress your modelling journey you should learn to avoid these functions. Plus, you also learn the sad truth that Excel can’t even do basic maths sometimes! Join us to hear from financial modelling specialist Andrew Berg, who has spent years building models, and so happily admits he has probably already made most of the mistakes you haven’t yet had a chance to! The good news is that he is willing to share the tips he has learned about the right types of error checks to add to your models so you don’t have to learn the hard way. ★Download the resources here ► https://plumsolutions.com.au/virtual-… ★Register for more meetups like this ► https://plumsolutions.com.au/meetup/ ★Connect with Andrew on Linkedin ► https://www.linkedin.com/in/andrew-be…

Author(s): Andrew Berg, Danielle Stein Fairhurst

Publication Date: 2 June 2021

Publication Site: YouTube

12 strategies to uncover any wrongs inside

Mary Pat Campbell
How to Determine If Your Actuarial Model is Right

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Excerpt:

Look for nonlinearities

Not all 10% increases are created equal. And by that we mean, assumption effects are often more impactful in one direction than in the other. Especially when it comes to truncation models or those which use a CTE measure (conditional tail expectation).

Principles-based reserves, for example, use a CTE70 measure. [Take the average of the (100% – 70% = 30%) of the scenarios.] If your model increases expense 3% across the board, sure, on average, your asset funding need might increase by exactly that amount. However, because your final measurement isn’t the average across all the scenarios, but only the worst ones, it’s likely that your reserve amounts are going to increase by significantly more than the average. You might need to run a few different tests, at various magnitudes of change, to determine how your various outputs change as a function of the volatility of your inputs.

Publication Date: 14 July 2021

Publication Site: SLOPE – Actuarial Modeling Software

How the government’s mistaken prices disclosure derailed a big follow-on solicitation

Mary Pat Campbell

Link: https://federalnewsnetwork.com/contracting/2021/07/how-the-governments-mistaken-prices-disclosure-derailed-a-big-follow-on-solicitation/

Excerpt:

When the Defense Information Systems Agency sought a new satellite services acquisition on behalf of the Navy, it included a spreadsheet so bidders could fill in their prices. But the spreadsheet included the prices from the current contract, which were supposed to be inaccessible. For how things turned out, Smith Pachter McWhorter procurement attorney Joe Petrillo joined Federal Drive with Tom Temin.

…..

Joe Petrillo: Sure. This is another excel spreadsheet disaster, and we talked about one a few weeks ago. It involved an acquisition of satellite telecom services for the Navy’s Military Sealift Command. It was an acquisition of commercial satellite telecommunications services. And they were divided into both bandwidth and non-bandwidth services. And the contract would be able to run to for up to 10 years in duration. Part of the contract, as you said, was an excel spreadsheet of the various different line items with blanks for offers to include their price. Unfortunately, this spreadsheet had hidden tabs, 19 hidden tabs, and those included, among other things, historical pricing information from the current contract. So Inmarsat, which was the incumbent contractor, holding that contract, notified the government and said, look you’ve disclosed our pricing information, do something about it. So the government deleted the offending spreadsheet from the SAM.gov website. But they understood and this was the case, third party aggregators had already downloaded it, and it was out there, it was available.

Author(s): Tom Temin, Joe Petrillo

Publication Date: 8 July 2021

Publication Site: Federal News Network

The tyranny of spreadsheets

Mary Pat Campbell

Link: https://financialpost.com/fp-work/the-tyranny-of-spreadsheets-we-take-numbers-for-granted-until-we-run-out-of-them

Excerpt:

Somewhere in PHE’s data pipeline, someone had used the wrong Excel file format, XLS rather than the more recent XLSX. And XLS spreadsheets simply don’t have that many rows: 2 to the power of 16, about 64,000. This meant that during some automated process, cases had vanished off the bottom of the spreadsheet, and nobody had noticed.

The idea of simply running out of space to put the numbers was darkly amusing. A few weeks after the data-loss scandal, I found myself able to ask Bill Gates himself about what had happened. Gates no longer runs Microsoft, and I was interviewing him about vaccines for a BBC program called How to Vaccinate The World. But the opportunity to have a bit of fun quizzing him about XLS and XLSX was too good to pass up.

I expressed the question in the nerdiest way possible, and Gates’s response was so strait-laced I had to smile: “I guess… they overran the 64,000 limit, which is not there in the new format, so…” Well, indeed. Gates then added, “It’s good to have people double-check things, and I’m sorry that happened.”

Exactly how the outdated XLS format came to be used is unclear. PHE sent me an explanation, but it was rather vague. I didn’t understand it, so I showed it to some members of Eusprig, the European Spreadsheet Risks Group. They spend their lives analyzing what happens when spreadsheets go rogue. They’re my kind of people. But they didn’t understand what PHE had told me, either. It was all a little light on detail.

Author(s): Tim Harford

Publication Date: 29 June 2021

Publication Site: Financial Post

Report: Teacher pension error traced to single miscalculation in April 2015

Mary Pat Campbell

Link: https://www.thecentersquare.com/pennsylvania/report-teacher-pension-error-traced-to-single-miscalculation-in-april-2015/article_34d84a56-c306-11eb-a252-4b78895ea004.html

Excerpt:

The calculation error that upended the state’s largest pension fund has been traced back to a single month in 2015, according to an investigation from Spotlight PA.

The discovery came to light in a trove of documents obtained by reporters that found a tiny discrepancy that boosted the $64 billion Public School Employees Retirement System (PSERS) by a third of a percentage point in April of that year.

The consultant firm hired to review PSERS’ investment returns between 2011 and 2020, ACA Compliance Group, performed limited checks that skipped over the month in question, according to the report. The company that crunched the actual numbers, Aon, blamed the discrepancy on a data entry error.

No matter the fault, the miscalculation unraveled PSERS’ rate of return, dropping it from just above the mandated 6.36% threshold to prevent a contribution increase down to 6.34%. Now, about 100,000 workers who joined the system in 2011 or later will pay more beginning on July 1.

Author(s): Christen Smith

Publication Date: 1 June 2021

Publication Site: The Center Square

A company you’ve probably never heard of caused half the internet to go dark

Mary Pat Campbell

Link: https://www.vox.com/recode/2021/6/8/22524024/fastly-web-outage-news-websites?mc_cid=1581e9eab7&mc_eid=983bcf5922

Excerpt:

One of the reasons the Fastly outage seems so wide scale is that cloud computing service companies like Fastly are consolidating, leaving websites dependent on a shrinking number of providers. Even if there aren’t that many total outages, the fact that so many everyday sites rely on fewer cloud providers makes each individual outage feel pretty significant to an average internet user who just wanted to buy some stuff on Amazon and read the New York Times early Tuesday morning.

There are benefits to consolidation, explains Doug Madory, the head of internet analysis at the network monitoring company Kentik. For instance, a smaller number of cloud providers means it’s much easier to get those providers to deploy a particular security change. “The flip side is the liability [of] having a few megacompanies, whether they’re CDNs or other types of internet firms, responsible for a lot of our internet activities,” Madory told Recode.

In other words, when one of these megacompanies updates its systems and inadvertently causes an outage, the damage radius could be quite wide. This is what happened in 2011 when one of Amazon’s cloud computing systems, Elastic Block Store (EBS), crashed and brought Reddit, Quora, and Foursquare offline. After the incident, Amazon explained that engineers inadvertently caused technical problems that trickled down through its systems and caused the outage.

Author(s): Rebecca Heilweil

Publication Date: 8 June 2021

Publication Site: Vox recode