Sometimes the biggest news is about what made the news. Last week, two reports from Juniper Research and KPMG generated the following headline on BBC News:
Mobile firms bleed billions to fraud and bill errors
I have not had time to digest the KPMG report, and I will not be buying the Juniper report. But I have a question for the industry. Are we glad to get this news coverage? Is this a good thing for people working in revenue assurance and fraud management?
Five years ago (!), I pointed out there is a double-edged saw when it comes to reporting losses. Big losses help to get big attention… but if you get attention, then you have to show you can do something about those losses. Hence, as a risk manager, my immediate concern when assessing the true degree of risk is to judge the impact of bias… including the bias of people who make money from selling reports and consulting services. Bias can work in two ways: overstating a problem if you are not responsible for it, and understating it if you are. Reporting loss rates of 15% might be a wonderful tactic if yesterday you were given the responsibility for managing the RA and Fraud Management department. But if you were in the job for five years and reported 15% of losses consistently over that period, I would fire you. No ifs, no buts, I would kick you out. And firing you would be for your own good – if you had that little effective influence, you need to get a new job for your own sake. So how do I read the ‘bleeding billions’ headline? I read it as fundamentally negative, because revenue assurance and fraud management is not new.
There is an easy way to deal with bias in reporting estimates, but sadly there is no evidence it has been used by either KPMG and Juniper. Instead of just estimating the scale of the current problem, and perhaps looking to the future, it also makes sense to look to the past. Is the problem bigger or smaller than it was last year, the year before that, five years ago, etc? As I also argued (over three years ago!) RA needs to cultivate a memory in order to see problems clearly and prevent the same mistakes from happening over and over. If we looked at our collective memory for loss, what would it tell us? I hope it tells us that loss is going down, for one simple reason: money is being spent on revenue assurance and fraud management that was not being spent on them before. That money needs to generate a return, or it is being wasted. Either way, the memory helps us to keep our estimates straight and honest – or else we are arguing that we are inadequate for the task we set ourselves.
