Spreadsheets of risk data can unknowingly open businesses up to additional liabilities – the very thing they were trying to reduce! Learn how to recognize spreadsheet risk and learn common errors to help your business reduce its exposure.
When editing an online spreadsheet, have you ever inadvertently deleted important fields and were unable to retrieve them?
Most of us have. Unfortunately, for the majority of businesses, this scenario is more than just a little embarrassing. It’s actually a liability.
Spreadsheet risk can cause significant financial loss due to errors in gathering, maintaining and aggregating data manually.
Take the 2018 Citibank case in which the mega financial services group settled with the SEC for $5.75 million after spreadsheets were used to engage unauthorized transactions. Or the U.K.-based liquor store chain’s spreadsheet miscalculation that caused a 60% loss in stock market value.
Digitalization has enabled rapid data collection in just about every industry. Spreadsheets have become more complex, and users have become increasingly creative in manipulating them – almost always without management oversight. These forces have led to increased spreadsheet risk for organizations across the globe.
Spreadsheet risk is the liability businesses assume when they manually gather, track and store critical data in simple spreadsheets.
When humans are at the helm of a spreadsheet, there’s always room for error. According to IBM, as many as 88% of all spreadsheets contain at least one error — and any attempts to correct these errors often introduce new ones.
Many companies use a series of spreadsheets to gather data from across their organization to:
When gathering data from across an organization for the internal management and external reporting of a company’s risk, or to inform the annual insurance renewal, mistakes can be both costly and detrimental to the business’ reputation. The first step in preventing spreadsheet risk is understanding common errors.
Spreadsheet errors most often occur with input data, formulas, calculations and formatting. The more errors that occur, the more risk the organization assumes. Consider the following common spreadsheet errors:
While it’s easy to see why and how spreadsheet errors happen, businesses continue to work in spreadsheets because of their utility and flexibility. And yet, when it comes to collating information necessary for an insurance renewal, common spreadsheet errors quickly become a major source of stress and tension.
Spreadsheet errors and inaccuracies are the main reason businesses fall short of meeting data requirements for insurance renewals and new coverage applications.
In fact, underwriters typically receive less than 50% of the application data they need to accurately quantify an organization’s risk and exposure. Businesses that fail to communicate their complete risk data to an underwriter will likely face higher premium costs and lower limits, which can be detrimental to a business for years to come.
Data that is critical to the insurance application and renewal includes, but is not limited to existing losses and exposures, current risk management practices and detailed claims history. Without the right data gathering processes in place, these metrics and others can be hard to garner from a series of spreadsheets.
In today’s hard insurance market in which policy and claims costs have already swelled, most businesses can’t afford to be incorrectly assessed for higher premium costs and lower limits.
Instead, businesses are best off employing a single technology solution that can eliminate the need for disjointed spreadsheets and inaccurate logging. This technology platform should reduce the risk of human error, streamline data collection while ensuring data accuracy and provide a complete picture of the business’ total risk for their insurance carrier.
When employing insurance renewal software to help aggregate data ahead of a business’ annual insurance renewal, the completion rate of the underwriting applications jumps to as high as 80 to 90%. This often leads to a premium savings, or in the current hard market, can minimize additional costs and rate raises.
If your business is spending more time managing data-rich spreadsheets than actual risk, it’s time to explore a suite of technology-driven risk management solutions to help your business eliminate error around every corner.
For more information on reducing spreadsheet risk across your enterprise, check out our Ultimate Guide to Renewals.