Time is money. Every time information is delayed by data friction, there is a cost. Data friction drains productivity, is the enemy of efficiency, and can leave you reacting to something not anticipated because you didn’t have the right data at the right time.
Consider the hidden cost of data friction lurking in your internal processes. Spreadsheets are often seen as a low-cost risk-management option because they require little training to use and are already installed on virtually every computer. However, if you add up the operational costs of the time required to manually collect, format, and consolidate data, plus the financial costs associated with human error, and the strategic costs of the opportunities missed because no one had the time for deep analysis, this “free” solution may not seem like such a bargain.
The time that you spend consolidating data is time that isn’t spent making the strategic decisions that could ultimately help lower the cost of risk. The time staff spends cleaning up their own spreadsheets is time not spent uncovering the root cause of a safety situation. When inefficiencies become ingrained in daily operations, you may not realize how many opportunities are being missed or the true impact on the bottom line.
External partners have their own friction problems. Multiple systems, numerous data formats, and different regulatory requirements make it difficult for carriers and TPAs to convert, consolidate, and report their data cost effectively. Aggregating, normalizing, and transforming data from hundreds of sources is complicated and expensive. Unfortunately, their data friction becomes your problem when you can’t get critical information when and how you need it.
How extensive – and expensive – your data friction problem is depends on how complex your risk ecosystem is and how successful you are at managing the copious amounts of necessary data. The more data sources and stakeholders in your ecosystem, the greater the friction will be – and the higher the cost.
What starts as a relatively simple risk ecosystem, can morph into something much more complex virtually overnight. A new business location will bring new exposures. An acquisition will add risks, including some that may be completely foreign to your current operations. New products will bring risks of new suppliers and a new supply chain. If your technology, processes, and people aren’t sophisticated enough to manage the expanding ecosystem, the resulting data friction could be very costly.
Understanding your risk ecosystem is critical to quantifying your data friction costs. Ask yourself:
- How easily does information flow through your ecosystem?
- Is your risk management philosophy about creating new value or keeping costs down?
- How many brokers, TPAs, and carriers do you work with?
- Do you have multiple business units?
- How many locations and employees?
- Which jurisdictions are you operating in?
- What regulators are you subject to?
- Who are the key management players within your organization?
- What are your data sources? Where are they housed?
Check out our blog, “5 Steps to Unlock the Flow of Information,” to learn what you can do to improve the flow of data, reduce data friction – and ultimately lower costs.