There is a saying: “having one’s heart in the right place.” It means you have positive intentions to accomplish good things. I was recently involved in plenty of discussions and debates about the ultimate “right place” of Revenue Assurance (RA). RA by definition is about doing good things: contributing to profit, revenue and cash flow improvements with the use of data quality and process improvement methods. Isn’t this a self-evident must for every telecom operators’ management to foster and expand RA?
RA always has its heart in the right spot
Historically, RA has focused on network to bill processes, finding leakages and billing errors and recovering them whereas many organization have been “self-sponsored”. During the last decade RA organizations have evolved towards applying RA best practice principles to the entire process chain. According to the TM Forum’s RA survey 2016 most have at least an order-to-cash scope with notable revenue coverage levels. The majority of RA functions systematically measure leakage and recovery. Teams are equipped with powerful tools, analytical skills, end-to-end process knowledge as well as assurance techniques. They strive to have a permanent impact on process transparency, establishment of ownership and systematic and active risk management.
Connecting the dots with customer experience
Last year I wrote an article entitled “dreaming up the revenue assurance function of the future” reflecting on a possible evolution path for revenue assurance. Complex multi-business partner eco systems are evolving fast where the operator has to guarantee the ultimate customer promise. A robust and well controlled need-to-order process and solid fulfillment capabilities in a multi-vendor environment are becoming important building blocks for assuring customer experience. In other words what is stated in the customer service agreement of an operator and their business partners needs to be secured at all times. RA should also try to align their objectives towards customer experience related topics such as “getting the bill right”. In order to support the ultimate customer promise, RA needs to balance their traditional financial KPI set with IT governance, process improvement and customer experience related targets.
Finding the ultimate place for revenue assurance
Possible future locations of RA will depend much on the company’s objectives and how future RA team capabilities could help the company achieve their short and middle term objectives.
In a perfectly simplified business model with a lean organization and no legacy, RA functions could sit in product management. In a complex organization with a quality management regimen, RA could reside in process development or quality management. In organizations where risk management is engrained in the performance culture a preferable location for RA would be risk management.
Based on the recent RA survey, two-thirds of all RA organizations are currently located in Finance. This is an advantage for the alignment of RA activities with financial objectives and receiving the necessary prioritization from the management board. Many RA organizations directly contribute to cash flow and profitability improvements. Leading organizations apply comprehensive KPI sets whereas revenue loss prevention and non-financial measures have been integrated. For sure, many RA organizations in Finance have still plenty of development potential because Finance also strives for improved business partnering.
There will be discussions about the future place and evolution paths for RA, fraud management and other assurance functions at the RAG Summer Conference in London on July 7th and 8th. Several scheduled sessions will explore current and future priorities and paths to get there, and I look forward to contributing to those conversations.
How an Enterprise Risk Management approach could help
In the context of Enterprise Risk Management (ERM) at telecom operators the “revenue risk” is likely to be among the top 10 risks. RA is appreciated as a mature and visible active risk management activity that reduces revenue risk. RA’s understanding and discipline to measure risk impact provides the C-Level and corporate management a cookbook how to apply such practices to other ERM areas to limit the scale of uncertainty.
The recent RA survey showed that RA functions are increasingly combined with other functions which all try to contribute to managing the revenue risk end-to-end. Fraud management, credit control, risk management, partner management and customer analytics activities are also increasingly performed by RA staff. If a management board states that 10 percent of revenue is at risk then a big part of this risk is likely to relate to a combination of revenue leakages, fraud losses and credit losses. So, it makes perfect sense to have multiple adjacent activities managed in the same organization with the same objective to actively manage revenue risks.
If your heart is in the right place your feet will arrive at the right place
After an anxious situation I sometimes joke with my kids: “oh, my heart has almost dropped to my pants.” Surely unexpected negative surprises will repeat also in a revenue risk context. Revenue leakages may remain unidentified for a long time, and serious frauds will likely happen again. But with proactive revenue assurance principles, some of these events can be avoided and detection and recovery can be improved and accelerated.
RA organizations and their sponsors have a great opportunity to deploy best practice RA principles across their organizations. If they do, they will be able to manage uncertainties actively. This is especially true where cross-functional problems exist. To achieve this demands risk ownership and mitigation accountability from senior management, in order to ensure the appropriate prioritization of protection and optimization projects.
My personal aspiration is that revenue assurance principles will be embedded in people’s thinking and acted on daily. To realize this goal, RA needs to repeatedly demonstrate that complex problems outside the traditional RA domain can also be solved sustainably.