The start of the article infers that the London Whale Trade was caused by manual handling of data between spreadsheets.
The real reason came down to a flaw in the formula they were using. From the JP Morgan report:
... a decision was made to stop using the Basel II.5 model and not to rely on it
for purposes of reporting CIO VaR in the Firm’s first-quarter Form 10-Q.
Following that decision, further errors were discovered in the Basel II.5 model,
including, most significantly, an operational error in the calculation of the
relative changes in hazard rates and correlation estimates.
*Specifically, after subtracting the old rate from the new rate, the spreadsheet
divided by their sum instead of their average, as the modeler had intended.*
This error likely had the effect of muting volatility by a factor of two and
of lowering the VaR.... It also remains unclear when this error was
introduced in the calculation.
The whole concept of VaR is an industry-wide consensus hallucination. Even if you do it right you're doing it wrong.
But to your point, if this formula had been in a single library procedure in version control rather than pasted and repasted into various dingy corners of various spreadsheets, this sort of error would have been less likely. Manual handling of formulas is at least as dangerous as manual handling of data.
The real reason came down to a flaw in the formula they were using. From the JP Morgan report:
Source: http://www.zerohedge.com/news/2013-02-12/how-rookie-excel-er...