revenue assurance, risk and maturity presentation to the 4 th iir global forum on telecoms internal...

Revenue Assurance, Riskand Maturity

Presentation to the 4th IIR Global Forum on Telecoms Internal Audit, Risk Management and IT Controls

9th May 2007

Eric Priezkalns ACA MSc BARevenue Protect Limited

Copyright © Revenue Protect Limited 2007

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Introduction

Over 10 years of industry experiencespecialising in revenue assurance

Head of Revenue Assurance Controls at Cable & WirelessRA & Billing Best Practice Manager at T-Mobile UKBilling Integrity Manager at Worldcom UKConsultant and Financial Auditor at Deloittes

Set up Revenue Protect Limited to• Offer freelance consulting• Found the Independent Practitioners of Revenue Assurance• Establish an on-line revenue assurance community

Read more at revenueprotect.com

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Revenue assurance is

“Data quality and process improvement methods that

improve profits, revenues and cash flows without

influencing demand.”

Why talk about methods instead of goals?

How do methods about data differ to those about process?

Why are the financial goals stated vaguely in this definition?

Why exclude “influencing demand”?

What Is Revenue Assurance?

Source: TeleManagement Forum Manual TR131

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Revenue Assurance BasicsThe 4 C’s

Revenue Assurance focuses on each of these areas in order to detect leakage, correct or fix the issue and then ensure that changes are made to prevent that same issue from occurring in the future.

As RA develops other areas of leakage are identified throughout the metering and billing process. Using a mix of data analysis and process improvement techniques RA is able to move through the levels of maturity by striving for continual improvement.

Data analysis is focused upon a known leakage or area of leakage and offers quantitative results that the team can monitor over time. At this point the process improvement team are used to identify the root cause.

Process improvement considers the end to end process. Through this end to end understanding of the hand offs between processes potential revenue leakages are identified using risk analysis techniques. These areas are then handed over to the data analysis team to gather quantifiable results.

Capture Conveyance

Monitoring and Reporting

Detect EnsureCorrect

Collection

Calculation

The underpinning principle for the processing of data for metering and billing follows four logical steps:

Capture – recording the supply that is made

Calculation - the calculation of the charge due for the supply made

Conveyance – the transmission of data from the point of recording the supply to the point of presentation to the customer.

Collection – the collection of the charge due from the consumers of the service.

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Revenue Assurance and Risk

Revenue Assurance is concerned with internal operational risks

Per Basel II, operational risk =

“the risk of loss resulting from inadequate or failed

internal processes, people and systems, or from external

events”

More specifically, tends to be associated with losses related to execution, process and delivery management

Depending on the remit in the particular telco, may also cover some or all of• internal and external fraud• business disruption and system failures

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Execution, Delivery and Process:More from Basel IIThe following Basel II events correspond reasonably well to the

typical scope of revenue assurance

Transaction Capture, Execution & Maintenance

MiscommunicationData entry, maintenance or loading errorMissed deadline or responsibilityModel / system misoperationAccounting error / entity attribution errorOther task misperformanceDelivery failureCollateral management failureReference Data Maintenance

Monitoring and Reporting Failed mandatory reporting obligationInaccurate external report (loss incurred)

Customer Intake and Documentation

Client permissions / disclaimers missingLegal documents missing / incomplete

Customer / Client Account Management

Unapproved access given to accountsIncorrect client records (loss incurred)Negligent loss or damage of client assets

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Predictability of Risks Associatedwith Revenue AssuranceMost telcos invested in revenue assurance as a means to

• address known or suspected recurring problems• with obvious financial implications• where there was a lack of suitable and available resources

(manpower, tools, data) in the business to address them

The implications

• may lead a Revenue Assurance department to be treated as a profit centre

• high-probability, low-impact risks get most attention• low-probability, high-impact risks may get little or no

attention• perceived drivers for risk management (governance, external

scrutiny) may be different to drivers for revenue assurance (higher revenues, improved cash collection)

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Problems With Embedding RA InEnterprise-Wide Risk ManagementPersonnel may not recognise that revenue assurance is an element of enterprise-wide risk management

• little or no training or awareness of risk management• poor demarcation of responsibilities between the different

teams addressing risk

“our scope is undercharging, not overcharging”

Confused or conflicting priorities, either within or between departments, are not resolved

• reliability of financial reports vs. generating returns• prevention vs. detection• control environment vs. quick fix/win mentality

“we cannot afford to spend time addressing root causes”

“The RA department is a control; controls do not apply to us”

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The Dangers ofPiecemeal Risk Management

“While many firms have invested in enterprise risk

management, few adequately manage risk

interdependencies. Most firms manage risk in ‘silos,’ often

leaving them blind to relationships between risks.”

• Because revenue assurance tends to be directed at high-

probability, low-impact risks there may be a temptation to

assume that there is no linkage with low-probability, high-

impact risks• But consider the relationship between the accuracy of

transaction processing and reputation

Source: Deloitte “Disarming the Value Killers: A Risk Management Study”

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From Tiny Acorns...

“Companies need to go beyond risk management in silos to

create an integrated, organization-wide risk management

function.”

• But how do you build such a function, without stifling

invention, without compromising other priorities, without

creating a monolithic structure, whilst allowing room to utilise

the knowledge and initiative of individuals to counter risk?• Need a method that has this end goal in mind, but is realistic

about stages of development and enables people to retain a

sense of purpose and direction at all times• And can be applied to individual “silos” like revenue

assurance

Source: Deloitte “Disarming the Value Killers: A Risk Management Study”

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Assessing the Maturity ofRevenue Assurance

The RA maturity assessment and benchmark was developed in

collaboration with a number of TMF members including

• Cable & Wireless• cVidya• Ernst & Young• IBS• SubexAzure• Telenor• Telstra

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Revenue Assurance Maturity:Goals

• Provide a simple standard assessment for service providers

that can be completed in less than 90 minutes• Avoid quantitative measures of performance that may not be

readily available or which prejudge priorities in each business• Give a simple scoring mechanism and enable benchmarking

between service providers• Applies equally well to all types of service provider

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Revenue Assurance Maturity:Principles

• State a model of growth that treats the silo as a transitional

stage during development but not as the ultimate conclusion• Assess the business as a whole, not just the people responsible

for revenue assurance• Address all relevant aspects of business performance• Give a strategic roadmap which clarifies what the next series

of ambitions should be• Structure borrowed from the Carnegie-Mellon SEI CMMI• Based on a Deming-like model of improvement, where

performance follows a pattern of being increasingly• repeatable, then• measurable, then• predictable

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Revenue Assurance Maturity:5 Stages of Maturity

5. Continuous improvement via feedback. Decentralised, holistic ownership.

4. Leakage quantitatively understood and controlled.

3. Standardised approach developed. Designing-in control commences.

2. Basic project/process management. Repeatable tasks.

1. Ad-hoc, chaotic. Dependant on individual heroics.

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Revenue Assurance Maturity:5 Aspects of PerformanceThe assessment is divided between 5 distinct aspects:

• Organisation• Influence• People• Tools• Process

Each is assessed separately• To consolidate improvements in one aspect, the others must

also mature, for example

• Cannot make use of good tools without right people• Influence degrades if organisation wrong• May not be able to quantitatively measure the success of

process improvements without adequate automated tools• All aspects must be aligned to avoid a silo mentality

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Key Maturity Thinking

The maturity assessment started as an academic exercise, capturing past experiences of the individuals involved

But the thought experiment generated interesting and unexpected results on the future of revenue assurance

• Being more mature does not mean having a bigger revenue assurance department

• Leadership in revenue assurance involves giving credit for relevant controls and monitoring performed in a wide variety of business functions and trying to align them into a common approach

• Daily operational monitoring and other revenue assurance controls can and should be exported to the relevant operational department even if developed/prototyped by the revenue assurance team first

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Any questions?

[email protected]

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