06/07/2017
Revenue assurance or money assurance? Evolution or decline?
As a discipline, revenue assurance (RA) must evolve, to address the changing risks and priorities in the telecommunications sector. If not, it will decline!
Before starting, let’s set the scene with a few questions for revenue management practitioners:
How can you to talk RA with your CFO or CEO and get their interest if you are not part of the corporate business plan journey?
Do you ask for money based on the additional leakage you will expose, rather than what ‘revenue at risk’ (R@R) you will save?
Does the TM Forum RAMM (Revenue Assurance Maturity Model) truly cover all revenue at risk control aspects?
What about ‘iceberg syndrome’? Is what is unseen even more dangerous?
Do you know your revenue at risk and manage it properly?
Do you know how to argue for a reasonable and rational budget for RA, and obtain it?
Is it time to stop doing revenue assurance and start doing money assurance?
When we look across the spectrum of our discipline, we can make some general observations:
By adopting reconciliation techniques (duplex, circular…), most RA teams are more engaged in performing ‘traffic assurance’ than other aspects of revenue assurance.
Point 1 is a consequence of a bottom-up approach instead of a top-down approach. RA teams track gaps in CDRs (chargeable data records) even though we know that there is less correlation between traffic generated and revenues earned.
Point 2 is the result of not having a global approach, and because risk management has not been incorporated into our way of thinking.
We face too much complexity and as a result we are sometimes lost in transition. With new technological and business models evolving around us, it is becoming harder and harder to get to the root cause of a problem.
Risks of losses, which affect all aspects of the P&L – costs, profits and margins (as well as revenues) – are growing.
Chairs with three legs
To address our industry challenges, assurance practitioners have developed a three-legged approach: Prevent – Detect – Recover. But we still lack the fourth leg… and guess what happens if you sit on a chair with only three legs?
We need that fourth leg: a global comprehensive approach, to better understand the drivers of our work. Forecasting is needed to complete our assurance picture. Without forecasting, we are only reacting to the history of how revenue was made in the past, not addressing the scale of challenges in ‘money at risk’ assurance that we need to address now, to contribute to future profitability for telcos.
There are good reasons why the makers of chairs favor four legs over three! As in all things, the best evolutionary designs combine practicality, robustness and efficiency.
Money at risk
My proposal is to develop a money at risk model: Money@Risk.
We need Money@Risk to negotiate adequate budgets and be a significant part of the corporate business plan, alongside our colleagues in marketing, finance, sales, IT, networks…
We need to gain credibility by moving away from the fragmented approach to RA, fraud and security, towards a more integrated model. We can do this by creating a ‘bridge between these disciplines.
Currently, we don’t have enough influence when talking to C-level executives.
We do not have a clear position within the ‘magic triangle’ formed by finance, business operations and technology. We must constantly develop skills and methods to face the growing complexity of processes and technologies.
We must also be ever more ready to disclose losses and share performance benchmarks. The taboo against sharing numbers is outdated. Public and private companies already publish major financial figures (net income, investments…). It is trivial to think that publishing and sharing assurance figures could cause serious damage to the business.
We need to change the name of our discipline from revenue assurance to money assurance, to become more generic and cover a wider domain. We should aim to address all the key aggregates of the P&L: revenues, costs and margin assurance.
Money@Risk Model
The Money@Risk model is based on 12 formalized elements. The formalization of the three KPIs and the whole model is already available and being tested in a number of telco operators :
3 KPIs (Revenue at risk reported, Revenue at risk adjusted and Revenue at risk forecast) are the three top aggregates for risk management
3 variables (Risk factor (RF), Performance factor (PF) and Growth factor (GF) are the key drivers and forces influencing the revenue at risk. RF and PF are two forces that fight each other and have reverse influence on the revenue at risk: bad versus good. The good I refer to as the performance factor and the bad is the risk factor. The allies of the good are controls, performance and maturity. The allies of the bad are activity growth and vulnerabilities in systems and processes.
3 parameters (frequency of anomalies related with the CDRs, maturity power and the time series) giving all the dynamics related with targets and objectives to be negotiated with top management
3 Graphs (revenue graph, vulnerability graph and the scissor graph) giving visual and graphical representation of the outputs of the model
The 12 elements will be further defined and detailed in coming articles.
The key benefits and contribution of the model are that it brings a comprehensive tool that binds risk, performance and investments curves into revenue protection, with a degree of flexibility and that is business targets oriented.
This holistic approach based on ‘actual and forecast’ can support definition and implementation of a risk control strategy per revenue stream and/or business geographies, as well as supporting the decrease of revenue at risk while activity grows. It will also support budget negotiations with C-levels and give a new perspective on the revenue management discipline.
My aim is to encourage the collaborative creation of a fourth leg to our chair that leverages our methods. We already have three legs (Prevent – Detect – Recover) but we cannot sit comfortably when there are so many risks that may topple our chair. What do we have to gain? A better and more comprehensive response to the risks we face, a more integrated discipline and greater influence with the C-suite.
