How Can the CEO Use Revenue Assurance?

datePosted on 11:18, May 17th, 2012 by grapa

How can the CEO Use Revenue Assurance?

Hi, this is Rob Mattison, the president of GRAPA, the Global Revenue Assurance Professionals Association. This week, we will be presenting the next edition in our series “The Beginners Guide to Revenue Assurance”.

In our previous presentations, we covered some of the basic questions that the stranger to telecoms might ask. We established that revenue assurance was a function unique to telecommunications, and that the need that telecoms have for revenue assurance is usually caused by several factors, all concerned with the incredibly fast rate of change that telecom managers must face:

  • Hyper-technology – the rapid deployment and integration of ever more sophisticated and often experimental technologies.
  • Hyper-marketing – the breakneck rate at which telecoms must continuously alter and increase their market profiles.
  • Hyper-accountancy, the never-ending battle to modify business models, accounting approaches and controls to keep up with these other changes.

We saw that each telecom organization practices revenue assurance in unique ways, but in general it is employed to help managers deal with the four biggest risks to telecom revenues:

  • Fraud
  • Leakage
  • Margin Massacre
  • Marketing Madness

We also saw that revenue assurance can add a significant amount of value through the application of the three key revenue assurance activities:

    • Forensics (investigations)
    • Corrections
    • Compliance

Each of these functions is applied from within a well defined disciplinary framework known as the Revenue Assurance Lifecycle. We also established that these disciplines were applied to the biggest telecom risk areas using four levels of coverage (revenue operations assurance, revenue accounting assurance, margin and market assurance).

Given this background, we are ready to take on the next challenge, understanding exactly how the CEO or other managers can actually harness these disciplines to their best advantage. In order to understand the answer to this question, we need to spend a little time getting familiar with the nature of telecoms management and the relationship that telecom managers maintain with risk.

In the course of day to day operations, the telecom manager is continuously seeking out and processing information from hundreds of sources. Standard accounting reports, operational managers and their activity levels, and the random (or continuous) stream of complaints, problems and emergencies.

The number of “Risk Incidents” that pop up from one day to the next may be low, or high. But inevitably, the manager begins to accumulate a backlog of risk incidents that weigh upon his thinking and erode his confidence in his ability to make decisions, and the information that he is processing.

Telecom managers typically have a dramatic relationship with risk. If there are too few risk incidents, than the chances are good that the manager is either missing something, or there is a really big disaster waiting around the corner. There are two sides to the risk problem.

The Blame Game

On the one hand, when things do go wrong, people tend to panic, start looking for someone to blame, and set up the problem as one of pointing fingers and assigning responsibility.

This kind of blame gaming is usually of very low value in terms of overall organizational health. On the other hand, when things are going well, the tendency is for managers to ignore any warning signs that might ruin the appearance that all is well. Neither method provides for an optimum solution.

Whenever facing risks, the manager has a number of options for “mitigating” or “getting some control” over the risk. These options will depend upon the nature of the risk, the severity of the problem, the managers own confidence in different disciplines and teams, and the competence of the people available.

The decision to turn a risk problem over to the internal audit function can be highly effective, but often cannot be called upon to be effective in a short time frame. The Internal Audit solution does not provide the manager with any follow through – meaning that anything the internal audit group develops, he , the manager will have to resolve.

The decision to ask I/T to “fix” a problem, will always guarantee you one thing: that there will be a computer software solution at the end of the rainbow. Unfortunately, there are few problems in telecoms where software can really provide an effective solution anymore.

External consultants are often a good resource, but they are of course, expensive, and not always in tune with your environment.

Among the many options that the executive may have to the resolution of a risk situation is the revenue assurance team. Clearly, the revenue assurance team cannot be the solution to any and all risks, but the revenue assurance discipline, when backed by a good experienced staff, and the right tools, can be an incredibly effective resource.

The revenue assurance team has certain rules, principles, guidelines and tools to help the do their job, and the decision to use revenue assurance is a decision to employ those disciplines.

First – They focus only on revenues and margins. In other words, they will not get diverted by issues regarding politics, the ‘right way’ to do things or whether the solution uses I/T or not. The revenue assurance professional focuses on the money.

Second – They employ risk containment fields – a collection of industry standards based benchmarks that define the “standard practices” for each of these areas.

Third – They get a 360 degree view of the risk, assuring that all angles associated with the situation are taken into account.

Risk Containment Fields

The Revenue Assurance Professionals “Risk Containment Fields” or templates provide the revenue assurance professional with an industry standards based list of:

1. Things to check

2. Tests to run

3. Reports to provide to management

4. Standard processes to follow

That means the revenue assurance professional can walk into any area, no matter how complicated or confusing, and quickly assess risk, understand problems and provide proper controls. The specific parts of a template include:

  • Industry Standard Protocols – that tell the professional how things are typically done in these situations.
  • Standard Controls – that provide a comprehensive list of the things that must be checked.
  • Standard Reports – that provide management with clear and relevant information about the nature of the risk and cost of remedies.

These templates help the revenue assurance manager understand how decisions are being made in the area, how it is organized and measured, making the integration of appropriate controls easy and efficient.

Four Levels of Coverage

The revenue assurance discipline, and the standards provided by GRAPA, provide the revenue assurance professional with a comprehensive set of templates that make it possible to assure any type or level of revenue assurance risk, with a simple set of tools. These templates are organized in alignment with the Four Levels of Coverage that revenue assurance provides.

At the first level are the Revenue Operations controls/methods and reports. Each system involved in capture, processing and collection of revenues has a set of templates that make it easy for revenue assurance to assure them.

At the second level are the Revenue Accounting controls. Revenue accounting controls allow the manager to assure that the revenue numbers being reported are accurate and auditable and is made possible by ensuring the underlying revenue operations control sets are included in the analysis.

Margin controls communicate the nature and accuracy of the margins for different lines of business, promotions and products. The margin control sets are built upon the underlying operations and accounting components that make them possible.

Finally, at the highest and most critical level, the market controls integrate all of the lower level components while integrating the market risk, brand risk and sales forecast dependability into the risk equation.

Step 1: management communicates the risks that are causing a problem to the revenue assurance person. That person then “maps” the problem to the appropriate “controls pyramid”.

Step 2: The revenue assurance professional utilizes the methods, controls and reports for that domain, in order to quickly determine the nature and extent of the risk.

Step 3: initial findings are reported to management, so that manage now has a clear understanding of how big the risk is, and what the options are for minimizing it.

Step 4: The revenue assurance manager will then initiate the ongoing Risk Mitigation Process. This process will employ the revenue assurance skills of Forensics, Corrections and controls, to provide management with a continuous assurance of risk containment and reporting in these areas.

A Continuous Monitoring of the Domains

Its simple, revenue assurance provides a continuous monitoring of the domain, so that the Manager doesn’t have to worry.

The revenue assurance team keeps the risks up front and in the face of the manager, so that he doesn’t have to second guess himself in every situation. If the risk is higher than initially targeted, revenue assurance will let everyone know. If everything is OK, the manager gets the “thumbs up”. The keys are that there is a continuous monitoring, and that in this case, the revenue will always remain as the primary focus of the organization.

This then, creates a very different image of revenue assurance than many organizations have had in the past. For those organizations that really experience the benefits of revenue assurance, we find that it only happens when top management understands that what they really need is a continuous monitoring of risk.

A well run revenue assurance department provides the manager with an incredible increase in their ability to control the organization, to avoid risks and maximize profits in ways never before imagined.

I hope that this helps you to understand a little bit better about the situations where the executive finds revenue assurance to be of top value. If you are interested in more information about this process, I encourage you to pick up a copy of the revenue assurance standards book, or check out our other video/podcast presentations.

If you want to know more, stay tuned for the next presentation in our “Beginners Guide to Revenue Assurance”. In the next presentation you will learn how to organize your revenue assurance department. Until next time, this is Rob Mattison saying…be safe.

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