TELECOMMUNICATIONS            Entering a             new eraAre new value propositions opening up    for Revenue Assurance...
Contents            03        08       05        16
28        41                                Foreword03                              Executive summary                     ...
E ntering a n ew e ra                              m-commerce is                        the trend that will have          ...
E n t e r i n g a n ew e r aForeword           Rapid and far-reaching changes in the telecommunications           landscap...
E ntering a n ew e ra4
E n t e r i n g a n ew e r aExecutive summaryThe impact of market forces on telecommunications companiesA number of forces...
E ntering a n ew e ra                                               As they strive to identify and reduce revenue leakage ...
E n t e r i n g a n ew e r aThe telecommunications executives that took part in the survey are well aware ofthe consequenc...
E ntering a n ew e ra            The continuing battle against                                                      Despit...
E n t e r i n g a n ew e r arevenue leakageLeakage as a percentage of revenue                                             ...
E ntering a n ew e ra                                                                Main objective of RA functions       ...
E n t e r i n g a n ew e r a             Percentage of leakage identified by the RA function                               ...
E ntering a n ew e ra                      Proportion of leaked revenue recovered from subscribers and partners60         ...
E n t e r i n g a n ew e r a                  Reasons why organizations do not make the most of their RA functions        ...
E ntering a n ew e ra                                                               Change is the weak spot               ...
E n t e r i n g a n ew e r a                               Revenue stream most susceptible to revenue leakage/fraud Respon...
E ntering a n ew e ra      Revenue Assurance’s evolving                                                 RA has yet to achi...
E n t e r i n g a n ew e r arole in the organization                                                            Who does t...
E ntering a n ew e ra                                            Who does the RA team report to?                          ...
E n t e r i n g a n ew e r a                                           Should your organization have a Chief RA Officer?   ...
E ntering a n ew e ra                                                           Creating an effective RA structure        ...
E n t e r i n g a n ew e r a     KPMG Viewpoint     Bringing your best people together     Accepting that some small compa...
E ntering a n ew e ra                        And most (64 percent) do not have a cross-functional RA steering committee   ...
E n t e r i n g a n ew e r a                                             Responsibilities held by the RA function         ...
E ntering a n ew e ra                             KPMG Viewpoint                             Adding more value            ...
E n t e r i n g a n ew e r aWith most RA functions still evolving, telecommunications providers are wary ofpassing such a ...
E ntering a n ew e ra                            KPMG Viewpoint                            A need for more analytical rigo...
E n t e r i n g a n ew e r aIn contrast to RA functions, 84 percent of the companies in the survey have acentralized Fraud...
E ntering a n ew e ra                         A growing number of RA functions are becoming self-funding,                 ...
E n t e r i n g a n ew e r a                                                 Sharpening operations          When will RA b...
E ntering a n ew e ra                                                                A move towards standardization       ...
E n t e r i n g a n ew e r aOn a more positive note, there are signs of a more standardized approach to RA,with, 69 percen...
E ntering a n ew e ra                                                              Presence of RA/FM tool                 ...
E n t e r i n g a n ew e r a                      Percentage of RA checks automated                                       ...
E ntering a n ew e raThe power of people                        RA functions appear to have a good mix of technical and   ...
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
Global Revenue Assurance Survey 2012 – Entering A New Era
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Transcript of "Global Revenue Assurance Survey 2012 – Entering A New Era"

  1. 1. TELECOMMUNICATIONS Entering a new eraAre new value propositions opening up for Revenue Assurance functions? kpmg.com KPMG International
  2. 2. Contents 03 08 05 16
  3. 3. 28 41 Foreword03 Executive summary 05 The continuing battle against revenue leakage 0834 42 Revenue Assurance’s evolving role in the organization 16 Sharpening operations 28 The power of people 34 Conclusion and key takeaways 41 About the survey 42
  4. 4. E ntering a n ew e ra m-commerce is the trend that will have the greatest impact on the industry. Sean Collins Global Chair Telecommunications Media2
  5. 5. E n t e r i n g a n ew e r aForeword Rapid and far-reaching changes in the telecommunications landscape are increasing the risk of revenue leakage. Today’s operators have to cope with complex network systems, converged service offerings, multiple third party partners and a rise in outsourcing, all of which creates the potential for inaccurate data capture and billing, and increased fraud. In addition to these challenges, all operators are facing margin pressure, particularly with increasingly savvy customers, emerging data products, and the need to continually invest in network infrastructure to keep up with demand. Against this backdrop, intense pressure is on Revenue Assurance (RA) functions to identify and address revenue leakage and deal with the increased risk of fraud. ‘Leakage’ in this report refers to actual revenue leakage as well as revenue exposure – the identification of potential revenue leakage before the event has occurred. KPMG’s global study of revenue assurance and fraud management functions identifies the continued challenges faced by telecommunications companies today, and offers some guidance on how to reduce revenue leakage and optimize margins. In this, the second KPMG Global Revenue Assurance Survey, we spoke to executives responsible for RA from 137 telecommunications companies around the world. The results make compelling reading and show a number of interesting changes since the previous survey in 2009. We would like to thank all those who gave their valuable time to participate in the survey. Sean Collins Romal Shetty Global Chair Head of Telecommunications Telecommunications Media KPMG in India 3
  6. 6. E ntering a n ew e ra4
  7. 7. E n t e r i n g a n ew e r aExecutive summaryThe impact of market forces on telecommunications companiesA number of forces are at work in the telecommunications industry that are increasingthe potential for revenue leakage, and the survey responses show how operators aretransforming their businesses in response. Business transformation through increasing complexity With convergence comes complexity • Eighty-five percent of respondents provide converged services. • Growth in business process outsourcing, value-added services and tariff plans. • m-commerce is the single most transformative issue. Functional transformation as Revenue Assurance’s role evolves RA function still lacking influence • Only 21 percent report directly to the Board. • Only 25 percent of CFOs see a need for a chief RA officer. • ut… some positive signs of growing authority, with 85 percent of RA functions formally B involved in signing off on new projects. RA structure changing… but slowly • Only 24 percent of RA departments are fully centralized. • Forty-two percent of RA functions are cross-functional with a balanced representation. • Forty percent say they would never outsource RA. Revenue leakage a continuing threat Much work to be done to plug revenue leakage • hirty-six percent of respondents say their company leakage more than 1 percent of total revenue. T • Forty-one percent of RA functions fail to identify more than half of total leakage. • ew transformational projects (new technology, network, billing system migration, for example), N poor system integration and fraud are the top three sources of revenue leakage. • ewer revenue streams such as data/broadband, interconnect and value-added services are N more vulnerable.  Operational transformation to build better practice Strong signs of greater efficiency • Fifty-six percent of respondents say their RA function is self-funding. • ast majority have strong standard operating procedures for data sources and execution V processes for RA activities. • Seventy-eight percent use some kind of RA/fraud management tool. • ut… 52 percent say their senior management is not rewarded against RA performance, B which could weaken the focus on prevention and identification of leakage and fraud. Talent is high on the agenda • A functions have a good mix of technical and business competence. R • ixty-five percent expect to grow through internal development of people. S 5
  8. 8. E ntering a n ew e ra As they strive to identify and reduce revenue leakage and fraud, RA functions are looking to become more influential at the highest levels and sharpen their operations to become more efficient in an increasingly complex industry. Established trends Emerging trends • Outsourcing of core operations like Network and IT. • Likely increase in leakage owing to transformations like • High number of Value Added Services (VAS) parties m-commerce, Next Generation Networks and converged deployed. services. • High number of tariff plans on a monthly basis. • Primary focus on revenue leakage identification only. • Visibility to Audit Committee and Board of Directors. • Need for cross-functional establishment. • Creation of CXO position for RA. • Increased focus on product and network assurance. • Partial outsourcing of RA function. • Centralized RA functions. • Detailed process documentation around RA checks. • Performance incentives linked to RA savings for RA and • Focus on development of analytical and technical skills. business functions. • Existence of RA tool deployment. • Dedicated Fraud functions with increased visibility and • Low recovery rates for identified leakage. empowerment. • Establishment of fraud risk management framework. Convergence continues to be largely responsible for this increased complexity, with the vast majority (85 percent) of respondents providing converged services to their customers. However, when asked which changes would have the greatest impact on the industry, the number one response was m-commerce. This reflects the growth of mobile banking and payments, which is creating new, independent revenue streams with accompanying billing and security issues. Factors most likely to transform the telecommunications industry M-Commerce/banking/payments 74% Converged services 71% Next Generation Networks 65% Long-Term Evolution (LTE) standard 48% Mobile number portability 36% Mobile virtual network operator 32% Preferred carrier based 24% on subscriber choice Mobile advertising 16% Others (please specify) 12% 0 10 20 30 40 50 60 70 80 N= 114 respondents Respondents could select more than one response option. Source: KPMG Global Revenue Assurance Survey, 20126
  9. 9. E n t e r i n g a n ew e r aThe telecommunications executives that took part in the survey are well aware ofthe consequences of such major transformations. An overwhelming proportion(94 percent) believe the threat of revenue leakage and fraud will go up, and halfthink this rise will be significant. Impact of transformations upon the telecommunications industry 2% 4% 49% 45% N = 85 respondents Decrease in revenue leakage and threat of fraud No increase in revenue leakage and threat of fraud Partial increase in revenue leakage and threat of fraud Significant increase in revenue leakage and threat of fraud Source: KPMG Global Revenue Assurance Survey, 2012 The speed of change in the sector is breathtakingand putting an incredible amount of pressure on ourRevenue Assurance people. We have to adapt quicklyand decisively or else risk even greater leakage.Gabriela Sobral GilRevenue Assurance HeadTelefónica Latinoamérica 7
  10. 10. E ntering a n ew e ra The continuing battle against Despite their best efforts at prevention, more than a third of respondents are leaking in excess of 1 percent of total revenue. And the RA function has enjoyed mixed fortunes, with 41 percent failing to identify more than half of total leakage. Compared to the previous 2009 KPMG Global Revenue Assurance Survey, the proportion claiming leakage more than 1 percent has fallen considerably from 54 to 36 percent, although there is still clearly much room for improvement. The only regions to report worse figures than 2009 are Europe and the Americas, where the percentage claiming leakage over 1 percent of revenue has more than doubled. A significant shift to prepaid in these markets, along with an explosion in data usage via smartphones, has made providers in these regions more susceptible to losing revenue. More worryingly, a fifth of this year’s respondents admit to leaking up to 10 percent of annual revenue, and 15 percent report leakage of more than 10 percent. Asia Pacific appears to be the best performing region. Given the scale of these losses, it’s understandable that respondents consider the number one objective for RA functions to be the prevention, detection and recovery of revenue leakage. Other activities such as fraud prevention, revenue management and cost saving are given a far lower priority. A fifth of respondents are leaking up to 10 percent of total revenue8
  11. 11. E n t e r i n g a n ew e r arevenue leakageLeakage as a percentage of revenue Up to 1% of revenue Between 1-10% of revenue Greater than 10% of revenue 10% 18% 15% 15% 19% 50% 32% 75% 66% Africa Middle East Asia Pacific Europe AmericasFigures might not add up to 100% due to rounding.Source: KPMG Global Revenue Assurance Survey, 2012 N = 101 respondents 9
  12. 12. E ntering a n ew e ra Main objective of RA functions Respondents were asked to rank each objective in order of importance, with 1 being the most important. 80%80%70%60%50% 44%40% 31% 31% 30% 27% 26%30% 24%20%10%0% Prevent, detect and Assist in fraud Lead overall revenue Focus on revenue Enhance customer Train business Implementation Proactive identification recover revenue prevention management enhancement experience through personnel of new of new technologies leakage program across and cost saving product and about RA controls technologies/ and corresponding organization opportunities network assurance within daily transformational cost benefit analysis operations projects for the business N = 89 respondents Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank 7 Rank 8Figures might not add up to 100% due to rounding.Source: KPMG Global Revenue Assurance Survey, 2012. Variable performance of RA functions Not all RA teams are successfully spotting revenue leakage. Forty-one percent41 percent of the of the companies in the survey say they fail to identify more than half of totalcompanies in the survey leakage, although these figures differ widely from region-to-region. Relatively few RA functions have cross-functional teams that include the breadth of skillsfail to identify more than to identify every type of leak – especially those that happen at pre-billing levelhalf of total leakage. at the switches. Consequently, a fair proportion are found by other parts of the organization.Telecommunications providers in Europe and the Americas have by far the best track record, while those from Asia Pacific are the least impressive, with more than a quarter (26 percent) identifying less than 10 percent of all leakage. Operators in countries such as India tend to have less sophisticated systems yet must deal with enormous volumes of data records, so fail to detect patterns of revenue loss. KPMG Viewpoint Visible improvement As recently as three years ago, a number of operators didn’t even have dedicated RA teams, instead delegating responsibility to Internal Audit or other departments. The reduction in leakage relative to the 2009 survey is a sign of the growth of RA as a dedicated function, along with greater adoption of processes and tools (even if the latter hasn’t always run smoothly). Many operators in the Middle East and Africa are starting to take RA more seriously as they seek to address serious leakage. Ron Stuart Head of Telecommunications Media KPMG in South Africa10
  13. 13. E n t e r i n g a n ew e r a Percentage of leakage identified by the RA function Up to 10% of leakage 10–25% of leakage 25–50% of leakage Greater than 50% of leakage 5% 8% 16% 9% 14% 21% 26% 11% 19% 17% 11% 13% 54% 47% 70% 60% Africa Middle East Asia Pacific Europe Americas GlobalFigures might not add up to 100% due to rounding. N = 80 respondentsSource: KPMG Global Revenue Assurance Survey, 2012Recovering revenue continues to be a challenge, with just 40 percent ofrespondents managing to retrieve more than half of all losses from subscribersand partners. Companies from Europe and the Americas have the highest recoveryrates, while those from Africa and the Middle East are the least effective, with fourout of ten (39 percent) recovering less than 10 percent of their reported leakage. 11
  14. 14. E ntering a n ew e ra Proportion of leaked revenue recovered from subscribers and partners60 55%50 47% 39% 39% 40%4030 27% 26% 23% 20% 21%20 17% 11% 11% 11%10 7% 7% 0 Africa Middle East Asia Pacific Europe Americas Global N = 62 respondents Up to 10% of revenue 10–25% of revenue 25–50% of revenue Greater than 50% of revenueFigures might not add up to 100% due to rounding.Source: KPMG Global Revenue Assurance Survey, 2012 Europe and the Americas lead the way in terms of revenue recovery, with more than half the leakage recovered from customers or partners (partners refers to interconnect, roaming and VAS partners across business operations). Africa and the Middle East recovers 11 percent of leakage, predominantly due to service contracts being prepaid in nature. The respondents feel there are a number of reasons why they are not getting the most out of their RA functions, with ‘inconsistency of data across different systems’ top of the list, as the chart opposite shows. This could be influenced by the fact that many RA functions are not centralized, which limits the coordination with internal IT departments. And according to the survey participants, RA departments are also hindered by a lack of appropriate skill sets – which reflects recruitment, training and retention strategies. Some say they don’t have sufficient automated tools to support the processes; although the industry has invested heavily in tools, not all have brought the level of automation anticipated.12
  15. 15. E n t e r i n g a n ew e r a Reasons why organizations do not make the most of their RA functions Respondents were asked to rank each reason, on a scale of 1–10, with 10 being the highest Lack of data consistency across different systems 6.3 Non availability of requisite skill sets 6.1 Absence of automated tools to support the processes 6.0 Non-availability of accurate and timely 6.0 information from businessInconsistent procedures and policies across organizations 5.6Lack of authorization of RA function within the organization 5.3 Weak alignment between functional and overall 5.2 organizational objectivesLack of RA and fraud awareness within the organization 5.0 High cost of operations 4.8 Lack of defined scope for the function 4.7 0 1 2 3 4 5 6 7 8 N = 89 respondents Source: KPMG Global Revenue Assurance Survey, 2012 KPMG Viewpoint Coping with integration Systems integration is a major challenge for the sector, with many companies having built up a range of systems for billing, mediation and interconnect, which often don’t talk to each other very well. In addition to these challenges, vendors are constantly releasing new applications for value-added services, while different mobile Switching Center manufacturers use different data formats. In order to bring greater data consistency, providers are attempting to consolidate all their IT into one fully-integrated platform, which entails a huge cost and risk. Romal Shetty Head of Telecommunications Media KPMG in India 13
  16. 16. E ntering a n ew e ra Change is the weak spot Executives involved in the 2012 survey feel that new transformational projects (such as new technology, network and billing system migration), make their organizations highly vulnerable to revenue leakage and fraud. They are also concerned with poor billing system integration, as well as internal and external fraud. However, on a positive note, three-quarters (74 percent) of respondents say they are satisfied with their RA function’s ability to cope with transformation. Aspects of the business most vulnerable to revenue leakage/fraud Respondents were asked to rank the vulnerability of each business aspect, on a scale of 1–10, with 10 being the highest New transformational projects 6.5 Poor system integration from 6.4 MSC-IN-Mediation-Billing systems Frauds (internal or external) 6.3 Interconnect and roaming billing 6.2 New product development and tariff configuration 6.0 CDR generation issues at MSCs/incorrect usage data 5.6 Intelligent network charging failures 5.6 VAS partner payments 5.3 Retail billing systems errors 5.3 Complex tier-based pricing 5.2 Sales commissions 5.1 0 1 2 3 4 5 6 7 8 N = 44 respondents Source: KPMG Global Revenue Assurance Survey, 2012 Prepaid, roaming and post-paid are the three revenue streams most susceptible to leakage or fraud, which is not surprising as these currently generate the greatest volume of payments. However, alternatives such as data and broadband, interconnect and value-added services are not far behind, and may take on more importance as mobile data usage increases over time – particularly with the emergence of m-commerce. A quarter of all respondents now have 50 or more third party partners providing value-added services, so this area of the business is also likely to become more significant for RA functions. Responses differ by region, with value-added services considered a highly vulnerable stream by Asia Pacific providers, and data and broadband a bigger worry in Europe and the Americas.14
  17. 17. E n t e r i n g a n ew e r a Revenue stream most susceptible to revenue leakage/fraud Respondents were asked to rank the susceptibility of each revenue stream, on a scale of 1–10, with 1 being the highest 2.2 4.0 4.5Africa Middle East 2.8 5.2 4.8 5.9 5.9 4.5 4.8 5.3 Asia Pacific 3.4 3.4 4.0 5.9 4.9 4.0 3.4 4.0 4.2 Europe Americas 4.5 3.7 5.6 6.7 3.6 3.8 4.4 Global 3.7 4.5 4.0 5.7 6.1 0 1 2 3 4 5 6 7 8 9 10 N = 46 respondents Prepaid Post-paid Interconnect Roaming VAS Data and broadband Fixed line Carrier* Source: KPMG Global Revenue Assurance Survey, 2012. *Carrier refers to wholesale telecom providers responsible for carrying voice and data networks across different service providers. 15
  18. 18. E ntering a n ew e ra Revenue Assurance’s evolving RA has yet to achieve influence at the very highest level; only one in five (21 percent) of respondents say their RA function reports directly to the Board of Directors. And just 24 percent of RA departments hold fully centralized control over their organizations, which could hinder the spread of consistent RA practices. For most of the telecommunications providers taking part in the survey, RA reports to either the CFO (46 percent) or the dedicated Head of RA, who in turn reports to the CFO (45 percent). Respondents from Africa and the Middle East are more likely to have a direct line to Finance, with the CFO playing a dual role encompassing RA. However, just 21 percent of RA functions report directly to the Board and only 11 percent to the Audit Committee. These figures have nonetheless improved since the previous survey, and with virtually all respondents claiming to have an independent RA department, RA is slowly gaining in importance. Just 21 percent of respondents say their RA function reports directly to the Board of Directors16
  19. 19. E n t e r i n g a n ew e r arole in the organization Who does the RA team report to? 6% 6% 6% 3% 53% 38% 35% 6% 47% 40% 4% 56% Africa Middle East Asia Pacific Europe Americas Other senior CFO management Head of Dedicated Dedicated members Internal Audit RA Head CTO RA head CFO 4% 3% 45% 1% 1% 46% Global Figures might not add up to 100% due to rounding. N = 78 respondents Source: KPMG Global Revenue Assurance Survey, 2012 17
  20. 20. E ntering a n ew e ra Who does the RA team report to? Audit Board of Neither Committee Directors Africa Middle East 29% 21% 50% Asia Pacific 6% 12% 82% Europe Americas 0% 28% 72% RA teams reporting to the Audit Committee and/or Board of Directors 2009 2011 Africa Middle East 30% 50% Asia Pacific 6% 18% Europe Americas 15% 28% N = 78 respondents In Africa and the Middle East, RA appears to hold greater status, with half of the respondents saying their RA function has a straight line to either the Board or the Audit Committee. These two regions suffer particularly with leakage, so loss of revenue becomes a big issue for the Board, who take a greater interest and want to deal more directly with the senior RA managers. A number of respondents are concerned that RA’s lack of seniority inhibits its effectiveness. Fifty-four percent are not fully satisfied with the existing communication with senior management, while a lack of career opportunities is considered one of the main reasons for staff attrition. But is RA likely to step up and gain Board-level recognition? It depends upon who you ask. Of the RA Heads taking part in the survey, 57 percent feel that a Chief Revenue Assurance Officer would benefit their company, whereas only 25 percent of CFOs see a need for such a role.18
  21. 21. E n t e r i n g a n ew e r a Should your organization have a Chief RA Officer? Global CXO Group responses RA Head responses52% Yes 25% Yes 57% Yes48% No 75% No 43% No N = 90 respondentsSource: KPMG Global Revenue Assurance Survey, 2012 KPMG Viewpoint Moving up? RA/Fraud Management has evolved considerably over the last few years from its earlier role as an ‘assistant’ to the wider Finance team. Although there is some way to go before it’s considered a true business advisor, a growing number of companies are involving RA in product, system and network planning in a bid to proactively prevent leakage and fraud. Currently, most RA teams ultimately report to the CFO, who is a powerful sponsor able to ensure action is taken. However, given the volume of fraud and revenue leakage across the industry, the function needs to exert greater influence at the very top of organizations – but if Board-level ‘impact’ is to become a reality, organizations will have to carefully consider the RA function’s independence. Joe Gallagher Head of Telecommunications and Media   Europe, Middle East Africa 19
  22. 22. E ntering a n ew e ra Creating an effective RA structure It’s not just the status of RA that can impact its effectiveness; organizational structure is an important factor in achieving consistent practices and enabling information to flow freely. Only a quarter (24 percent) of respondents claim to have a centralized RA function with representatives within each business/operating unit. Given that a majority also feel it’s a challenge to get hold of accurate information from the business, a lack of centralization could restrict the ability to prevent and identify leakage. RA representation in each business/operating unit can also be beneficial, as it gives a single point-of-contact for all leakage and fraud issues and also facilitates efficient implementation of RA activities. From a regional perspective, respondents from Europe and the Americas appear to have the most sophisticated, centralized organizational structures, while businesses in Asia Pacific are far more likely to be decentralized. Interestingly, those regions with greater centralization also have a better record at identifying revenue leakage. In keeping with the previous 2009 survey, the vast majority (95 percent) do not plan to move toward an outsourcing model in the next few years. Structure of RA 16% Centralized with a representative 12% at each operating Unit/Circle 36% 24% 52% Centralized with complete 47% execution at corporate level only 56% 53% 12% Completely de-centralized RA/FM with 35% teams at all operating Units/Circles 6% 14% 16% 6% Co-sourcing model for RA/FM 3% 8% 4% Plan to move towards an outsourcing 0% model in the next few years 0% 1% 0 10 20 30 40 50 60 N = 78 respondents Africa Middle East Europe Americas Asia Pacific Global Figures might not add up to 100% due to rounding. Source: KPMG Global Revenue Assurance Survey, 2012.20
  23. 23. E n t e r i n g a n ew e r a KPMG Viewpoint Bringing your best people together Accepting that some small companies with a limited number of operations may actually benefit from a more decentralized approach, there is a strong case for centralizing teams and bringing your best people together. In dispersed RA functions, much of the know-how exists within individuals. A centralized team leads to greater knowledge sharing and standardization, with best practices emerging, and the added benefit of reduced staff numbers due to economies of scale. Companies must also be aware of legal restrictions on data sharing between countries, which may mean retaining local teams. A centralized department is also reliant on strong, integrated systems and processes. The pros and cons of centralizing should be properly considered from all angles before any decision is taken. Peter Mercieca Head of Telecommunications Media Asia PacificFewer than half (42 percent) of respondents say their RA function is cross- Only 42 percent offunctional with a balanced representation across departments. As mentioned,the complexity of the telecommunications environment means that leakage respondents say theircan occur at any stage of the revenue generation cycle. Cross-functional RA function is cross-membership should bring an understanding of each part of the business andthe accompanying interdependencies. In particular, a strong link between RA functional with a balancedand the broader risk management function should be considered. Without such representation acrosscross-functional knowledge, it’s difficult to gain an all-round picture, leavingcompanies more susceptible to leakage and fraud. departments. Is RA a cross functional team?80 76%70 56% 58%60 52% 48%50 44% 42%4030 24%2010 0 Africa Middle East Asia Pacific Europe Americas Global N = 78 respondents Yes NoSource: KPMG Global Revenue Assurance Survey, 2012 21
  24. 24. E ntering a n ew e ra And most (64 percent) do not have a cross-functional RA steering committee comprising of head of departments of all functions (who would meet periodically to assess the extent and sources of revenue leakage). Such a body can help spread best practice and extend the influence of RA. Respondents from Africa and the Middle East are the most likely to have such a committee, with organizations from Asia Pacific lagging behind. Proportion of organizations with cross-functional RA steering committees 80% 80 70 66% 64% 60 52% 48% 50 40 34% 36% 30 20% 20 10 0 Africa Middle East Asia Pacific Europe Americas Global N = 73 respondents Yes No Source: KPMG Global Revenue Assurance Survey, 2012 Supporting the business Most of the respondents say their RA function focuses primarily on network, billing and product-related assurance. However, considerably fewer are involved with customer service and sales assurance, and only a third (35 percent) carry out regulatory checks as part of a wider RA review. These findings are further evidence that RA is still viewed as more of a support function than a strategic partner. RA departments in organizations from Asia Pacific appear to be particularly narrow in the scope of their responsibilities.22
  25. 25. E n t e r i n g a n ew e r a Responsibilities held by the RA function 96% 88% Africa Middle East 68% 68% 88% 79% 79% Asia Pacific 29% 36% 79% 87% 90% Europe Americas 48% 52% 87% 89% 87% Global 51% 54% 86% 0 20 40 60 80 100 N = 70 respondents RA checks – network assurance (yes %) RA checks – sales assurance (yes %) RA checks – product assurance (yes %) RA checks – rating, collection and partner payment assurance (yes %) RA checks – customer service assurance (yes %) Figures might not add up to 100% due to rounding. Source: KPMG Global Revenue Assurance Survey, 2012.A majority (85 percent) of RA functions are formally involved in signing off on new 85 percent of RA functionsprojects, which indicates that the risk of leakage and fraud is a big considerationwhen launching products, billing systems and migrations, or when moving into are formally involvednew geographies. In Europe and the Americas however, only 31 percent of RA in signing off on newfunctions actually have mandatory sign-off on such initiatives; in Asia Pacific thisfigure is 77 percent. projects 23
  26. 26. E ntering a n ew e ra KPMG Viewpoint Adding more value RA is in an ideal position to look at the entire revenue cycle and identify opportunities for cost savings and revenue enhancement. Through data analytics and modeling, RA professionals also gain a unique understanding of customer behavior and could make an important contribution to marketing and improving the overall customer experience – a big area of focus for the sector. Romal Shetty Head of Telecommunications Media   KPMG in India The intense competition in Asia Pacific sees new products rolled out every few days, which leaves providers highly susceptible to leakage, so there is a move to tighten up procedures. Companies in more established markets, on the other hand, have a longer time frame so can build more checks and balances into the development process. RA has traditionally had a role in new product launches, but is slowly gaining influence in IT and network implementation, which should help to weed out any potential flaws at an earlier stage and provide a more holistic evaluation of the project. To outsource or not to outsource? Even though most operators already outsource core functions such as networks, billing and customer services, there seems to be a preference for retaining RA in-house. Forty percent of respondents say they would never contract out RA to a third party and a further 40 percent would only allow partial outsourcing. These findings are very similar to the previous 2009 survey. Would you outsource RA? 50 45% 44% 42% 39% 40%40% 40 35% 36% 30 29% 19% 20% 20 11% 10 0 Africa Middle East Asia Pacific Europe Americas Global N = 84 respondents Yes Partially No Source: KPMG Global Revenue Assurance Survey, 201224
  27. 27. E n t e r i n g a n ew e r aWith most RA functions still evolving, telecommunications providers are wary ofpassing such a sensitive part of the business to third parties, especially given thegrowing need for strong governance over revenue. In future it’s possible that certainactivities may be outsourced to benefit from new, advanced technologies.Fraud management is still emergingThe management of fraud is an evolving activity; 40 percent of the surveyrespondents have a dedicated fraud management function, and in two-thirds ofcases this department is less than ten years old. Consequently, it’s no real surprisethat only 44 percent claim to have a fraud risk management framework in place.Fraud monitoring teams are becoming increasingly empowered, with most(77 percent) having the authority to take independent remediation action, suchas disconnecting subscribers. Almost half of these teams (47 percent) have ‘readand write’ access to operation and business support systems and 82 percent usefraud-based alarm monitoring. Is your fraud management team empowered to take actions to remediate issues? 1% 22% 77% Yes No Other N = 64 respondents Source: KPMG Global Revenue Assurance Survey, 2012Half (49 percent) of the respondents claim to use a combination of in-houseand third party RA/fraud management tools when addressing fraud, whichsuggests that many telecommunications providers limit their focus torevenue-related frauds. 25
  28. 28. E ntering a n ew e ra KPMG Viewpoint A need for more analytical rigor RA/Fraud Management tools in use today are often not integrated and fail to identify, monitor and report a significant number of revenue frauds let alone instances of non-revenue fraud. Companies need to consider how to strategically and proactively address these threats. Advanced data analytic techniques can identify suspected fraudulent activity across various functions on a real or near-real-time basis, and could help proactively identify and/or prevent fraudulent activities.  Carl Geppert Global Telecommunications Media Advisory Lead KPMG in the US Use of RA and fraud management tools 1% 3% 3% No, neither RA nor FM tools 22% Yes - only FM tools Yes - only RA tools Yes, both RA and FM tools – Third 9% party tools on RA and FM Yes, both RA and FM tools – In-house 3% developed tools and dashboards 59% Yes, both RA and FM tools – Third party tools on RA and FM test call generators Yes, both RA and FM tools – Third party tools on RA and FM, In-house developed tools and dashboards N = 68 respondents test call generators Figures might not add up to 100% due to rounding. Source: KPMG Global Revenue Assurance Survey, 2012. However, fraud management still has some way to go before it can be regarded as a senior-level operating function. Fewer than half of the companies in the survey have dedicated fraud management heads, with the majority reporting to either the Head of RA, the CFO or in some cases the CEO. And like their RA counterparts, relatively few fraud teams report to the highest levels in the organization; 27 percent report to the Board of Directors and 16 percent to the Audit Committee. The overall scope of responsibility of fraud management departments appears to be reactive or tactical rather than strategic. Most respondents say their teams carry out continuous monitoring and fraud identification, with limited involvement in forensic investigations, and little or no evidence of a whistle blower policy and code of conduct – cornerstones of proactive fraud management. Few claim to have a brief to build an organization-wide anti-fraud culture. 26
  29. 29. E n t e r i n g a n ew e r aIn contrast to RA functions, 84 percent of the companies in the survey have acentralized Fraud Management team, which will aid consistency. Not surprisingly giventhe sensitive nature of fraud, only a small proportion outsource or co-source this activity. Structure of Fraud Management team 4% 12% 84% N = 49 respondents Centralized with complete execution at corporate level only Co-sourcing model for FM team Outsourced FM teams Figures might not add up to 100% due to rounding. Source: KPMG Global Revenue Assurance Survey, 2012. KPMG Viewpoint It’s time for fraud management to come of age From our research it is clear that there is a growing incidence of telecommunications fraud being perpetrated internally, externally or in collusion with employees and channel partners and, as such, there is – in our view – an increasingly compelling case for a separate and independent function to address these challenges. Non-revenue frauds can also contribute to substantial losses, so it’s important to look beyond revenue-related frauds such as de-duping and usage. And it’s not just about identifying frauds at the subscriber end; organizations should proactively check for internal vulnerabilities by widening the scope of the fraud management function. A well-structured fraud management team could not only identify criminal behaviour earlier, but also help to spot the potential process gaps that allow frauds to occur in the first place. Frauds can occur anywhere in the revenue cycle – procurement, sales, finance, human resources, supply chain management or customer services – so fraud management personnel need to understand every aspect of the revenue cycle to identify frauds (and the potential for fraud) at any stage. Joe Gallagher Head of Telecommunications Media   Europe, Middle East Africa 27
  30. 30. E ntering a n ew e ra A growing number of RA functions are becoming self-funding, as telecommunications companies develop more sophisticated approaches to preventing and detecting leakage. However, less than half of the respondents link RA performance to management incentives. Fifty-six percent of respondents say their RA function is self-funding (i.e. the56 percent of revenue recovered from subscribers and other partners is greater than the cost ofrespondents claim running the department), which is an improvement on the 2009 survey, when the figure was 46 percent. A further 22 percent expect to become self-funding withinto have a self-funding the next three years.RA function – up from The longer-established RA functions (those in operation more than 10 years) appear46 percent in 2009 to be struggling to realize efficiencies, as most of these have not managed to become self-funding, which suggests that they find it harder to change old ways of working. On a regional basis, companies from Europe and the Americas are most likely to have self-funding RA teams (76 percent), while those from Asia Pacific are least effective, with only 36 percent claiming to recover revenue that exceeds their running costs. Interestingly, RA functions in Africa and the Middle East recover proportionally less revenue than those in Asia Pacific, but still achieve higher self- funding rates, which is probably due to lower operational costs.28
  31. 31. E n t e r i n g a n ew e r a Sharpening operations When will RA become a self-funding, independent function in your organization? 47% 36% It is already self-funding 76% 56% 23% 29% Next 1–3 years 2% 16% 7% 11% Next 1 year 2% 6% 10% 11% Next 3–5 years 7% 9% 13% More than 5 years 14% 12% 13% 0 10 20 30 40 50 60 70 80 N = 99 respondents Africa Middle East Asia Pacific Europe Americas Global Figures might not add up to 100% due to rounding. Source: KPMG Global Revenue Assurance Survey, 2012.Of course, there is a strong correlation between the ability to identify and recoverleakage and the incidence of self-funding. The survey suggests that the majorityof companies have not yet built such linkages into their planning; 86 percent ofrespondents say their RA budget is not dependent on leakage identified, and fewsay their RA function has specific leakage identification targets.Only a third of survey participants claim to have a pre-defined savings target, whichcould lead to a lack of focus for the RA team. In my role as a CFO at BT Global Services I would expect that, at the very least, my RA and Fraud Management teamwould be self funding, directly improving my EBITDA and creatingquantifiable value to my organization. Hugo EalesCFOBT Global Services 29
  32. 32. E ntering a n ew e ra A move towards standardization An RA function should not just be measured by the leakage identified and the amounts recovered, but also by the prevention processes it has in place. When it comes to defining data sources and execution processes for RA activities, most of the organizations involved in the survey say they have strong standard operating procedures. However, the responses are less emphatic when it comes to procedures for escalation matrices, turnaround times for closure and issue aging. For example, only a fifth (22 percent) of companies from Europe and the Americas include turnaround time for issue closure in their standard operating procedures and only 35 percent have a formal process for issue closure. Proportion of companies with standard RA operating procedures (SOPs) 100 92% 88% 86% 82% 82% 79% 80 73% 72% 66% 61% 60 57% 55% 54% 45% 45% 45% 39% 40 22% 20 0 Africa Middle East Asia Pacific Europe Americas N = 65 respondents Data sources Escalation matrix Issue aging Execution process Turn around time for closure KPIs and threshold limitsRespondents could select more than one response option.Source: KPMG Global Revenue Assurance Survey, 201230
  33. 33. E n t e r i n g a n ew e r aOn a more positive note, there are signs of a more standardized approach to RA,with, 69 percent claiming to carry out reviews of RA activity on either a monthly or Enhancedquarterly basis, which should help to assess performance more rigorously. automation and issue tracking incumbent KPMG Viewpoint with new RA tools is an important goal for us Plugging the gaps in 2012. We’ve worked Without a proper escalation matrix, any issues raised may fail to reach diligently to assess, the right levels of management, while the lack of an agreed and defined metric for turnaround time for closing issues could limit the ability to procure, and implement recover revenue, as it becomes harder to trace sources of leakage over a new toolset to enable time. The Board, CFO or RA Steering Committee will be very keen to improved identification ensure that issues have been resolved quickly, so closure /remediation is a and recovery. vital objective that requires a formal process. Peter Mercieca Head of Telecommunications Media Jay M Franklin Asia Pacific Director, AccountingThe right tools for the job? SprintAutomation can save time and resources and free up RA personnel to spend moretime on strategic issues, so it’s reassuring that 78 percent of the companies involvedin the survey use some kind of RA/fraud management tool. As the chart on page 32shows, Europe and the Americas have the highest presence of RA/fraud managementtools (at 81 percent), closely followed by Africa and the Middle East at 79 percent.However, more than a third (36 percent) of respondents are not satisfied with these toolsand 44 percent say they have only brought limited automation, as can be seen on the‘Satisfaction with RA Tool’ chart on page 32. In some cases, staff may not be sufficientlytrained to make effective use of a tool, which could impact the benefits. In otherinstances the RA team may not have been fully involved during the initial business caseand configuration of the tool, which reduces the sense of ownership and accountability. KPMG Viewpoint Know what you want Many telecommunications companies have not seen a good return for the large sums invested in tools, so a rigorous evaluation process is needed to agree the precise requirements and ensure that vendors meet these objectives. Romal Shetty Head of Telecommunications Media India 31
  34. 34. E ntering a n ew e ra Presence of RA/FM tool 100 21% 19% 80 31% 60 40 79% 81% 69% 20 0 Africa Middle East Asia Pacific Europe Americas N = 68 respondents Yes No Source: KPMG Global Revenue Assurance Survey, 2012 Satisfaction with RA tool Africa Middle East 43% 39% 18% Asia Pacific 39% 39% 22% Europe Americas 29% 50% 21% Global 36% 44% 20% 0 20 40 60 80 100 N = 89 respondents Not satisfied Satisfied Very satisfied Source: KPMG Global Revenue Assurance Survey, 201232
  35. 35. E n t e r i n g a n ew e r a Percentage of RA checks automated 13% 15% 24% 29% 20% N = 56 respondents 0–20% 20–50% 50–70% 70–85% 85–100% Figures might not add up to 100% due to rounding. Source: KPMG Global Revenue Assurance Survey, 2012Linking performance with incentivesSeventy-three percent of respondents say their companies have defined keyperformance indicators (KPIs) and threshold limits at an operational level for their RAfunction, which brings greater accountability for revenue prevention, identificationand recovery. This trend is less pronounced in Africa and the Middle East.However, many telecommunications providers have so far been unwilling totake ultimate responsibility for RA at the very highest levels. More than half(52 percent) of the executives taking part in the survey say their senior managementis not rewarded against performance of the RA function, in terms of the cost ofleakage and the value of revenue recovered. And only 21 percent of respondents’companies incentivize business function heads outside of RA, which reflects a lackof organization-wide focus on leakage, prevention and recovery.This reluctance to link RA performance with incentives is also due to the lackof a common standard for measuring leakage, making it hard to compare theeffectiveness of prevention and identification activity between different products. Executives rewarded against RA performance Yes 48% No 52% 0 10 20 30 40 50 60 N = 91 respondents Figures might not add up to 100% due to rounding. Source: KPMG Global Revenue Assurance Survey, 2012 33
  36. 36. E ntering a n ew e raThe power of people RA functions appear to have a good mix of technical and business competence, but a number also lack key technical and telecommunications industry skills. A majority expect to build their teams through nurturing existing employees rather than via external recruitment. The respondents to the 2012 survey seem to have a healthy spread of skill sets in their RA teams, with a broader balance and an increase in technical skills compared to the previous report in 2009. Half of all staff are graduates and more than a quarter are telecommunications engineers, with a number of MBAs, accountants and other engineers. Companies in Africa and the Middle East report the highest proportion of telecommunications engineers, while those from Europe and the Americas have relatively few individuals with such a background. Operators in the Asia Pacific region employ fewer graduates, although a high proportion of these people have gained MBAs, which should bring strong business skills to the function. KPMG Viewpoint A burning platform RA departments in regions such as Africa face very high leakage levels and need strong technical competence today to counter this threat, so choose to employ experienced telecommunications engineers. In markets such as the US and Europe, RA teams have matured over time, enabling staff from a variety of backgrounds to build up sufficient skills, so there is less need to recruit new specialists. There is also likely to be greater collaboration with the network group, which has vital RA knowledge, whereas in emerging countries the assurance tends to be more independent. Ron Stuart Head of Telecommunications Media KPMG in South Africa34

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