With the insurance sector facing a number of business challenges today – Brexit, market uncertainty, sustained low interest rates, disruption caused by newer technologies such as AI, regulation and more – the imperative for effective management of operational risks is increasing. At the same time, with pricing and commoditization pressures, insurers need to continuously adapt to changing demands – e.g. for new and more evolved product offerings – or to new market and economic conditions.

Typically, the spreadsheet is the ‘go to’ tool for new product development, regulatory, compliance and risk management initiatives at insurer organizations due to the flexibility and agility they offer, but they bring with them a fair share of challenges too. Due to the absence of effective change control policies and measures for spreadsheet usage, inadvertent errors can expose insurers to significant risks including portfolio, model, reporting and regulatory. All this cumulatively has the potential to considerably impact organizations’ business operations.

For instance, insurers rely heavily on spreadsheets for solvency-related risk assessments to comply with Solvency II requirements – a regulation that demands that the existence of a data repository where end-users can refer to understand how data is being used in the financial models. It also stresses that insurers must use fully auditable data for calculations such as minimum capital requirements and solvency capital requirements. Without the necessary change control and attestation processes for the spreadsheet models, insurers will struggle to meet the high standards of data integrity that the regulation demands.

Insurers can materially reduce the scale and scope of risks to the business by adopting a strategic, automated approach to spreadsheet risk management. It will help insurers create processes to monitor change as a matter of routine by capturing metadata attached to the spreadsheet processes and applications so that there is transparency to demonstrate auditability. The meta data will also highlight the links across the governance hierarchy. Attestation management of spreadsheet models will too become standardized.

The benefits of this approach will accrue to all aspects of the business where spreadsheets are used – be it regulation, new product development or financial reporting.

ClusterSeven are hosting a series of webinars over the next three months on this topic. To learn more about how spreadsheet risk management can help the insurance sector mitigate operational risk and drive business performance, visit here for details and registration.

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