Why Spreadsheets can send the Pillars of Solvency II Crashing Down


Solvency II is now fast approaching and while it may provide added protection to policy holders, its impact on the insurance industry is not all a bed of roses. Expect insurance companies to restructure, increase manpower, and raise spending on actuarial operations and risk management initiatives. Those that cannot, will have to go. But what have spreadsheets got to do with all these?

Well, spreadsheets aren’t really the main casts in this blockbuster of a regulatory exercise but they certainly have a significant supporting role to play. Pillar I of Solvency II, which calls for improved supervision on internal control, risk management, and corporate governance, and Pillar II, which tackles supervisory reporting and public disclosure of financial and other relevant information, both affect systems that have high-reliance on spreadsheets.

A little background about spreadsheets might help.

Who needs an IT solution when you can have spreadsheets?

Everyone in any organisation just love spreadsheets; from the office clerk to the CEO. Because they’re so easy to use (not to mention they’re a staple in office computers), people employ them for processing numbers and as an all-around tool for planning, forecasting, reporting, complex modelling, market data analysis, and so on. They make such tasks faster and easier. Really?

You probably haven’t heard of spreadsheet hell

Unfortunately, spreadsheets do have certain shortcomings. Due to their inherent structure and lack of controls, it is so easy to commit simple errors like an accidental copy paste, an omission of a negative sign, an incorrect data input, or an unintentional deletion. Such shortcomings may seem harmless until your shareholders discover a multi-million discrepancy in your financial report.

And because spreadsheet errors can go undetected for a long time, they are constant targets of fraudsters. In other words, spreadsheets are high risk applications.

Solvency II Impact on Spreadsheet-based Financial and IT Systems

Regulations like Solvency II, are aimed at reducing risks to manageable levels. Basically, Solvency II is a risk-based system wherein a company?s capital requirements will depend on its measured riskiness. If companies want to avoid facing onerous capital requirements, they have to comply.

The three pillars of Solvency II have to be in place. Now, since spreadsheets (also known as User Developed Applications or UDAs) are high-risk applications with weak control features and prone to produce inaccurate reports, companies will have a lot of work to do to establish Pillars II and III.

There are at least 8 articles that impact spreadsheets in the directive. Article 82, for example, which requires firms to ensure a high level of data quality and accuracy, strikes at the very core of spreadsheets? weakness.

A whitepaper by Raymond Panko entitled ?Spreadsheets and Sarbanes-Oxley: Regulations, Risks, and Control Frameworks? mentioned that 94% of audited real world operational spreadsheets that were included in his study were found to have errors and that an average of 5.2% of all cells in the audited spreadsheets had errors.

Furthermore, many articles in the directive call for the enforcement of better documentation. This is one thing that’s very tedious and almost unrealistic to do with spreadsheets because just about anyone uses them. Besides, with different ‘versions? of the same data existing in different workstations throughout the organisation, it would be extremely difficult to keep track of them all.

Because of spreadsheets you now need an IT solution

It is clear that, with the growing number of regulations and the mounting complexity of tasks needed for compliance, spreadsheets no longer belong in this era. What you need is a server-based solution that allows for seamless collaboration, data reliability, data consistency, increased security, automatic consolidation, and all the other features that make regulation compliance more doable.

One important ingredient for achieving Solvency II compliance is sound data risk management. Sad to say, the ubiquitous spreadsheet will only expose your data to more risks.

More Spreadsheet Blogs


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Disadvantages of Spreadsheets – obstacles to compliance in the Healthcare Industry


How Internal Auditors can win the War against Spreadsheet Fraud


Spreadsheet Reporting – No Room in your company in an age of Business Intelligence


Still looking for a Way to Consolidate Excel Spreadsheets?


Disadvantages of Spreadsheets


Spreadsheet woes – ill equipped for an Agile Business Environment


Spreadsheet Fraud


Spreadsheet Woes – Limited features for easy adoption of a control framework


Spreadsheet woes – Burden in SOX Compliance and other Regulations


Spreadsheet Risk Issues


Server Application Solutions – Don’t let Spreadsheets hold your Business back


Why Spreadsheets can send the pillars of Solvency II crashing down

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Do you really need a Cloud Broker?

A cloud broker is someone who can serve as your trusted adviser when it comes to your dealings with a cloud service provider. Sort of an IT consultant who: is familiar with cloud computing, can negotiate a mutually beneficial relationship between you and a provider, and help you manage usage, performance and delivery of cloud services.?But do you need one?

Is it even time for cloud adoption?

Of course, if you haven’t even started considering moving your IT systems to the cloud, what’s the point of reading this article, right? Well, if you’re running a business in Ireland or the UK maybe you should start thinking about it. The benefits (of moving to the cloud) are simply overwhelming. But then that’s for another post.

For now, let’s just briefly talk about the rate of cloud adoption so far. This should give you an idea what other decision makers nearby think about cloud computing and what they’ve done in this regard so far.

According to research conducted by the Cloud Industry Forum (CIF), the number of first-time users of cloud computing in the United Kingdom has risen by about 27% compared to last year.

The study, which was carried out by research company Vanson Bourne and which involved IT decision-makers from both the private and public sector in UK, also showed that 61% of companies are subscribing to cloud-based services. A similar research conducted last year (2011) revealed only 48%.

In Ireland, plans are underway to adopt cloud computing. According to Pricewaterhouse Coopers, 75% of Ireland’s CIOs and IT directors are already adopting a cloud computing strategy.

Definitely, the number of cloud adopters is growing. If that number already includes your hottest competitor, then perhaps there’s no time to waste.

But while a migration to the cloud should be in your pipeline, it shouldn’t be something you should rush into. Generally speaking, there are at least three kinds of services offered by cloud service providers: IaaS (Infrastructure as a Service), PaaS (Platform as a Service), and SaaS (Software as a Service).

Some providers offer variations of these services. You might only need one type of service or a little of everything. There are also technical and regulatory compliance issues that need consideration.

Obviously, if you have no idea where or how to start, you’ll need someone who can help you. But what kind of help do you need?

Let’s proceed by talking about the kinds of services cloud brokers offer as these are obviously indicative of the needs of current cloud customers.

What cloud brokers do?

Cloud brokers offer three main types of services.

Cloud?inter-mediation

Cloud inter-mediation services are designed to add value to existing services and improve capabilities. ?Examples of cloud inter-mediation include managing access to cloud-based services, carrying out performance reporting, and establishing stronger security.

Cloud aggregation

As mentioned earlier, some cloud customers may end up subscribing to multiple cloud services; most likely from different cloud service providers. To get optimal return on their various cloud subscriptions, these customers will need to apply data integration and make these disparate systems work together. They will also have to make sure data flowing from one system to another is kept secure. This is where cloud aggregation comes into play.

Cloud arbitrage

This entails finding the best cloud service provider(s) to solve a particular problem. One example is comparing different providers offering data storage services and identifying the one offering the most competitive rates.

Other cloud arbitrage brokers develop new solutions by combining the services of different cloud service providers and then offer them to cloud customers. While there are similarities between cloud arbitrage and cloud aggregation, the former is more flexible and allows the customer to transfer from one provider to another where conditions are more favourable.

Problems a cloud broker can help you solve

Just like with natural clouds, your experiences in cloud computing won’t be all white and fluffy. You’ll also encounter gray and uncertain (or even stormy) clouds.

One major issue in cloud computing is cloud security. In fact, cloud security (or the apparent lack of it) is the one thing that’s really clouding up the sky of cloud computing. But that doesn’t mean the cloud is totally insecure. Besides, there are certain types of information that really don’t require a high level of security. These types you can easily migrate to the cloud.

For sensitive information, you really need to conduct due diligence to make sure your cloud service providers’ data centres are secure enough.

Where exactly will your data be stored? Are there enough provisions for regulatory compliance? How will your data be segregated? Does the infrastructure readily support ?data forensics? Is there a sound disaster recovery/business continuity plan? These are just some of the questions that need clear answers before you sign a contract with a cloud service provider.

Suggested reading: 9 Cloud Security Questions You Need To Ask Service Providers

Also, before you sign, you need to study the SLA (Service Level Agreement) very carefully. Look at the guaranteed uptime. Is it enough to meet your own desired service levels?

Bear in mind that the answers to these questions may be too technical. This is one of those instances when a cloud broker can come in handy. As your trusted adviser, your cloud broker can break down the technical jargon and present everything in a language that you can make intelligent decisions from.

A cloud broker will also be able to study the cloud provider’s security architecture and policies and determine whether they’re sufficient to meet your own security requirements. Basically, a cloud broker will not only help you obtain answers to your questions.

He will also know exactly what vital information to extract from providers in order to ensure that you find the best deal possible.

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UK Hauliers Pull Together on ESOS

ESOS is what UK business needed, to encourage it to become more responsible for the environmental consequences of making money. Government has met with industry leaders to hammer out the finer details. Now there are heartening signs of intra-industry collaboration, for the example the FTA approach we discuss here.

The Freight Transport Association (FTA) is one of the UK?s biggest trade associations, and exists to represent the interests of companies moving goods by air, rail, sea and road. It is their representative at national, European and local level that advises them on legal compliance. In February 2015, it announced plans to help the industry comply with ESOS too.

The association has been active since the announcement of the UK?s Energy Saving Opportunity Scheme. It has engaged with government and membership through the portal of its Logistics Carbon Reduction Scheme (LCRS). The Environment Agency has singled this out as a benchmark other industries could follow.

FTA general manager for consultancy and tendering Karen Packham recently said, ?With our highly experienced and fully qualified team of transport auditors ?the FTA is best placed to offer practical advice and is able to provide specialist audits to ensure members are fully compliant ? and will gain all the benefits that the scheme has to offer.?

These co-audits with Environment Agency specialists advising, will focus on the full range of operational and supporting activities, and ensure that all haulage companies with over 250 employees do the following:

  • Assess energy use across their full spread of buildings, transport media and industrial activity
  • Examine energy-intensive pressure points and identify savings opportunities that provide financial benefit
  • Nominate an ESOS person to conduct future audits, or oversee and approve them independently
  • Report to the Environment Agency as scheme administrator per statutory intervals

Ecovaro has energy management software that turns metrics into high-level information that busy people understand. Give us a call if you are puzzling how best to present your data. We believe two heads can achieve so much more together.

Monitoring Water Banks with Telemetrics

Longstanding droughts across South Australia are forcing farmers to rethink the moisture in the soil they once regarded as their inalienable right. Trend monitoring is an essential input to applying pesticides and fertilisers in balanced ratios. Soil moisture sensors are transmitting data to central points for onward processing on a cloud, and this is making a positive difference to agricultural output.

Peter Buss, co-founder of Sentek Technology calls ground moisture a water bank and manufactures ground sensors to interrogate it. His hometown of Adelaide is in one of the driest states in Australia. This makes monitoring soil water even more critical, if agriculture is to continue. Sentek has been helping farmers deliver optimum amounts of water since 1992.

The analogy of a water bank is interesting. Agriculturists must ?bank? water for less-than-rainy days instead of squeezing the last drop. They need a stream of online data and a safe place somewhere in the cloud to curate it. Sentek is in the lead in places as remote as Peru?s Atacamba desert and the mountains of Mongolia, where it supports sustainable floriculture, forestry, horticulture, pastures, row crops and viticulture through precise delivery of scarce water.

This relies on precision measurement using a variety of drill and drop probes with sensors fixed at 4? / 10cm increments along multiples of 12? / 30cm up to 4 times. These probe soil moisture, soil temperature and soil salinity, and are readily re-positioned to other locations as crops rotate.

Peter Buss is convinced that measurement is a means to the end and only the beginning. ?Too often, growers start watering when plants don’t really need it, wasting water, energy, and labour. By monitoring that need accurately, that water can be saved until later when the plant really needs it.? He goes on to add that the crop is the ultimate sensor, and that ?we should ask the plant what it needs?.

This takes the debate a stage further. Water wise farmers should plant water-wise crops, not try to close the stable door after the horse has bolted and dry years return. The South Australia government thinks the answer also lies in correct farm dam management. It wants farmers to build ones that allow sufficient water to bypass in order to sustain the natural environment too.

There is more to water management than squeezing the last drop. Soil moisture goes beyond measuring for profit. It is about farming sustainably using data from sensors to guide us. ecoVaro is ahead of the curve as we explore imaginative ways to exploit the data these provide for the common good of all.

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