Why do Telecoms use Revenue Assurance?

datePosted on 23:30, March 24th, 2012 by grapa

In this, our second session in the “beginners guide to revenue assurance” series, we will tackle one of the biggest and most pressing questions that managers have when it comes to revenue assurance: “Why should the manager choose to use revenue assurance at all?”

As we have already established, the telecom industry is unique. While other industries like banking, manufacturing and retail naturally seem to integrate the integrity of revenue streams into their operational models only telecoms seems to need to make a specialized function out of it.

In order to understand why the telecom needs to pay special attention to their revenue assurance, we must begin establishing a better understanding of what exactly makes telecommunications so unique and what conditions are making revenue assurance more and more critical each day. raplan

To begin with, as anyone in the industry is aware, the telecommunications industry itself, for the past decade at least, has been undergoing an unbelievable amount of change in the fundamental way in which the telecom is run. The very nature of strategy in telecoms is undergoing a fundamental shift. The strategic planning window that used to be based upon years must now be executed in weeks.

Re-assessment, re-rationalization, and realignment of risk strategies change overnight, and the very definition of profit is constantly open for review. Change and uncertainty are epidemic.

New technologies, erratic markets, cut throat competition and hyper-sensitive investors are causing telecoms to find that increasingly, they need a special breed of “revenue champion” on their team to keep up with the incredible rate of change.

Managers are finding that the methods used in the past, in order to establish control over the accounting, sales, marketing and operational environments simply cannot keep up with today’s breakneck pace. The old controls are simply failing.

What successful telecom managers are doing is developing an entirely new generation of operational controls to manage their businesses; control methods that, like their business are sophisticated, highly flexible and far more focused on the real problems that need to be addressed.

The Four Symptoms of Operational Revenue Breakdown

The complexity and challenges of telecommunications management has always been complex and difficult. What is making it so much more difficult today? There are four critical factors, four symptoms that things are really getting out of control. We refer to these as Fraud Nightmares, Margin Massacres, Market Madness and Operational Ops.

Fraud Fright

Telco operators around the world are finding themselves with more fraud risks than ever imagined. Simboxes, fraudulent partners and the professionalization of phreaking (the hacking of communications systems and handsets) has become a major liability and source of unplanned losses to telecoms. The risk exposure keeps increasing, with less and less protection in sight.

Marketing Madness

Some of the biggest risks to the telecoms revenue these days come, not from operational breakdowns, but from the marketing organization. High Risk, high profile, immeasurable, uncontrollable marketing plans cost telecoms million, and no one is sure whether it’s working or not. Marketing and product developers keep taking bigger and bigger risks, with fewer and fewer methods available to monitor and contain that risk.

Margin Massacre

Investor demands for profitability and accountability and the razor thin margins that the telecom must maintain mean managers must be able to control margins, and be sure the margin expected is going to be realized. Too often, sales and marketing programs show incredible sales numbers, only to have the actual revenue realized disappear when unanticipated costs or conditions are experienced.

Leakage: Operational Oops

Unfortunately, the telecoms industry has a history of earning money, and then losing it due to operational incompetence. We call it “leakage” and modern telecoms face larger and more difficult to manage risks of leakage than ever before. The underlying problem is a simple one. Telecoms must continuously increase the speed with which they make high risk decisions, without putting so much control in place that they hamper their responsiveness and effectiveness.

That is no small order to fulfil. But what causes these problems? What specifically are the reasons that telecoms are facing so much more risk than ever before in these areas? There are three major contributors: Hyper Technology, Hyper-Marketing and Hyper-Accounting.

Hyper Technology

It is estimated that a new telecommunications breakthrough is invested every week. This means that in order to stay competitive the modern telecom must be in the constant state of re-evaluating, reconfiguring and re-deployment of new technologies. New technologies that don’t “fit” into the old way of doing things.

Hyper Marketing

Hyper Technology forces the telecom to take an even more aggressive stand when it comes to marketing. The successful telco launches new programs, promotions and products almost continuously. How can operational systems, technical managers and the controls infrastructure hope to keep up?

Hyper Accountancy

The result is a state of hyper-accountancy. Where profitability, CAPEX strategy, market strength and financial planning are questioned and re-calibrated on a quarterly or in some cases a weekly basis. Taken altogether these conditions create an environment in which nobody is really sure how anything works, or what the status of anything really is. People depend more and more upon guessing and just plain luck. The environment becomes a huge cloud. The revenue producing engine is in there, but no one can see clearly how it works.

The cost to the organization is great. Because of these hyper conditions and the obscuring of details within the “revenue cloud”, accounting systems, and accounting data, lag further behind the reality of the situation. Exiting revenue streams get more and more confusing, as the organization maps more and more different variant business models and technologies into the core systems and organization.

The acceptance of larger risks becomes commonplace. A fraud risk is discovered, and allowed to pass “just temporarily”. A few accounting controls are bypassed “just this once”, never to be implemented again. Each “exception” places another crack in the operational integrity of the organization. Eventually, the manager comes to realize that they are working in an “earthquake zone” where hundreds of these “little exceptions” can conspire and work together to create massive “faults” and failures with no warning.

Over the past several years, the revenue assurance discipline has been developing into an approach that can help management and operational managers address all of these risks in a simple, unified, systematic way. The effective revenue assurance team works as a “fast response team”, providing management with immediate support and focused attention on any risk to revenue in any form.

The unified, integrated approach allows for a single operational framework for administering and measuring activity, and the application of a consistent methodology across all domains provides for impressive economies of scale and cost reduction.

What are the key drivers of decision-making for the revenue assurance professional?

1. Prioritization – Address the biggest risks first

2. Rationalization – make sure that all activities provide a return on investment.

3. Consensus based – developing solutions that fit into the way people work best.

Good revenue assurance teams make all risks transparent, measurable and addressable.

How does the revenue assurance professional accomplish these things? It is not easy, and takes a lot of training, focus, discipline and experience.

The Four Revenue Assurance Disciplines

The four disciplines that drive this process are, Revenue Operations Assurance, Revenue Accounting Assurance, Margin Assurance and Market Assurance.

Revenue Operations Assurance

Revenue Operations Assurance is the process of making sure that all the people, systems, operations and policies associated with the capture and processing of revenue are well understood, and that the risks are identified and contained. Revenue Operations Assurance lets management know exactly where the risk is, how big the risk is in financial terms, and what it will cost (in terms of time and money) to contain the risk in the short or long-term. Revenue operations assurance provides management with a clear, measurable, traceable and easily understandable method of evaluating risks on a continuous basis.

Revenue Accounting Assurance

Some companies make use of revenue assurance only to do Revenue Operations Assurance, but many have found that there is even more benefit to be gained by applying these methods to other areas. Revenue Accounting Assurance is the process of verifying and mapping the revenue and cost numbers reporting in accounting systems back to their sources in the transaction management systems. One of the biggest challenges to the Hyper-Technology, Hyper-Accounting Telecom is the inability to get a clear, accurate and immediate understanding of where the financial numbers come from and how to verify them. Revenue Accounting assurance addresses that need.

Margin Assurance

In the final analysis, the day-to-day operation of the telecom boils down to the tracking of sales and margins. However, in telecoms, understanding and getting control over margins can be as good as impossible. Modern managers are constantly bombarded with margins that are unpredictable, immeasurable and improvable, making it impossible to develop an accurate picture of the financial strength of individual lines of business, products, promotions and assets. The Revenue Assurance margin assurance process makes margins transparent, provable and traceable in a way that greatly enhances the ability of operational managers to make optimum decisions.

Market Assurance

For those telecoms that are really embroiled in the hyper marketing/hyper technology game, managers quickly learn that the cost of going too fast, too soon is often paid for with that taking on of additional risks. Marketing promotions and product launches that fail to consider network risks, billing risks, partner skills, risk to brand image and a host of others can backfire costing the telecom more money than it is worth. The Revenue Assurance Market Assurance discipline allows management to put reasonable monitoring and controls over the marketing and new product development process without hampering the rate of launch and the creativity required to make it work.

In summary, the revenue assurance discipline is quickly turning into the “one stop shopping point” for management’s revenue risk challenges. The professional, effective revenue assurance department provides management with:

a. A checklist lets management know there are known “hidden risks” that have gone unconsidered.

b. A scorecard that allows management to track how well the organization in monitoring risk, and allows management to change the pace based upon this information.

c. A steering wheel that makes it easy for management to steer the right course.

The beauty and benefit of the revenue assurance discipline is the way it provides the organization with a simple, consistent and systematic approach to this dizzying array of different issues and domains in a cost effective, risk based, prioritized way that fits into your organizational culture and framework. Wow, sounds too good to be true doesn’t it? Well, it’s not.

However, that’s not to say that it is magical, and it’s not free. In our next session, we’ll start to explain exactly how it is that the revenue assurance professional can accomplish these objectives.

Until next time, this is Rob Mattison, saying….be safe.

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