In a previous post, we discussed how employees at any level of the organization have the potential to create significant liability and financial loss for their companies. To illustrate, we’re spending a handful of posts looking at some specific examples.
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Previously, we discussed the case of a Starbucks employee calling the police on two black men waiting at a table in one of its stores. Here, we’ll look at an example of a “fat finger” mistake.
Fat Finger Errors
A fat finger error is a term used predominately in the financial world. It’s best explained with a simple example. Imagine you’re offering to purchase something for $10,000, but you accidentally hit an extra zero on the keyboard, so you offer $100,000.
There have been plenty of incidences of fat finger mistakes over the years. Fortunately, these mistakes are typically noticed and corrected within seconds or minutes (although certainly not always). They still represent the potential for significant risk, though.
In the world of finance, for instance, a decimal place, a few seconds, or even a zero can mean enormous amounts of real money.
Samsung Suffers
According to Spectrum, fat finger errors—even if corrected—can still end up costing significant amounts of money in additional regulatory oversight and reporting. “An employee of Samsung Securities Co., Samsung Group’s stock-trading entity and one of the largest trading companies in South Korea, accidentally issued shares worth some $105 billion to 2,018 of its employees who are members of its stock-owner program,” reports Spectrum. Instead of receiving a dividend worth 2 billion Korean won (roughly $0.93 per share owned by employees), they received 2 billion shares.
Worse for Samsung, it took 37 minutes to fix the error after the company became aware of the problem, and 16 employees were even able to sell approximately 5 million shares of the erroneous payout, even after warnings from managers not to do so.
Spectrum says, “The combined action of the mistake along with the rogue employee share sell-offs helped depress Samsung Securities’ stock price by nearly 12 percent. Currently, its stock price is about 10 percent below what it was before the incident, which means the brokerage has seen its market value drop about $300 million.”
Along with the financial impacts, Samsung faces intense scrutiny from Korean regulators, who are looking into a number of irregularities, including questions about how so many shares—which didn’t even exist—could have been distributed in the first place, as well as the company’s response to the situation.
Major financial institutions have—or should have—numerous safeguards in place, both technological and procedural, to prevent these types of situations. But examples like this show that they can still occur as a result of human error. That’s human error that should be anticipated and addressed through frequent and ongoing training and communication.