Global Revenue Assurance Survey 2012 – Entering A New Era

TELECOMMUNICATIONS

Entering a
new era
Are new value propositions opening up
for Revenue Assurance functions?

kpmg.com

KPMG International

Contents

03 08

05 16

28 41
Foreword03

Executive summary 05

The continuing battle against
revenue leakage 08

34 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

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
Media

2

E n t e r i n g a n ew e r a

Foreword
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


Executive summary
The impact of market forces on telecommunications companies
A number of forces are at work in the telecommunications industry that are increasing
the potential for revenue leakage, and the survey responses show how operators are
transforming 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


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, 2012

6


The telecommunications executives that took part in the survey are well aware of
the consequences of such major transformations. An overwhelming proportion
(94 percent) believe the threat of revenue leakage and fraud will go up, and half
think 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


The speed of change in the sector is breathtaking
and putting an incredible amount of pressure on our
Revenue Assurance people. We have to adapt quickly
and decisively or else risk even greater leakage.

Gabriela Sobral Gil
Revenue Assurance Head
Telefónica Latinoamérica

7


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 revenue

8


revenue leakage
Leakage 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 Americas

Figures might not add up to 100% due to rounding.
Source: KPMG Global Revenue Assurance Survey, 2012 N = 101 respondents

9


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 8

Source: KPMG Global Revenue Assurance Survey, 2012.

Variable performance of RA functions
Not all RA teams are successfully spotting revenue leakage. Forty-one percent
41 percent of the of the companies in the survey say they fail to identify more than half of total
companies 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 skills
fail to identify more than to identify every type of leak – especially those that happen at pre-billing level
half 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 Africa

10


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 Global

Figures might not add up to 100% due to rounding. N = 80 respondents

Recovering revenue continues to be a challenge, with just 40 percent of
respondents managing to retrieve more than half of all losses from subscribers
and partners. Companies from Europe and the Americas have the highest recovery
rates, while those from Africa and the Middle East are the least effective, with four
out of ten (39 percent) recovering less than 10 percent of their reported leakage.

11


Proportion of leaked revenue recovered from subscribers and partners
60
55%

50 47%

39% 39% 40%
40

30 27% 26%
23%
20% 21%
20 17%
11% 11% 11%
10 7% 7%

0
N = 62 respondents

Up to 10% of revenue 10–25% of revenue 25–50% of revenue Greater than 50% of revenue


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


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 business

Inconsistent procedures and policies across organizations 5.6

Lack of authorization of RA function within the organization 5.3

Weak alignment between functional and overall
5.2
organizational objectives

Lack 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


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
KPMG in India

13


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


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


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
4.5
Africa 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*

*Carrier refers to wholesale telecom providers responsible for carrying voice and data networks across different service providers.

15


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 Directors

16


role 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

17


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


Should your organization have a Chief RA Ofﬁcer?

Global CXO Group responses RA Head responses

52% Yes 25% Yes 57% Yes
48% No 75% No 43% No
N = 90 respondents


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


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


20


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
Asia Pacific

Fewer than half (42 percent) of respondents say their RA function is cross- Only 42 percent of
functional with a balanced representation across departments. As mentioned,
the complexity of the telecommunications environment means that leakage respondents say their
can 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 and
the accompanying interdependencies. In particular, a strong link between RA functional with a balanced
and the broader risk management function should be considered. Without such representation across
cross-functional knowledge, it’s difficult to gain an all-round picture, leaving
companies more susceptible to leakage and fraud. departments.

Is RA a cross functional team?
80 76%

70
56% 58%
60
52%
48%
50 44% 42%
40

30 24%
20

10
0
N = 78 respondents

Yes No


21


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
N = 73 respondents

Yes No

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


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 %)


A majority (85 percent) of RA functions are formally involved in signing off on new 85 percent of RA functions
projects, which indicates that the risk of leakage and fraud is a big consideration
when launching products, billing systems and migrations, or when moving into are formally involved
new geographies. In Europe and the Americas however, only 31 percent of RA in signing off on new
functions actually have mandatory sign-off on such initiatives; in Asia Pacific this
figure is 77 percent. projects

23


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

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
N = 84 respondents

Yes Partially No

24


With most RA functions still evolving, telecommunications providers are wary of
passing such a sensitive part of the business to third parties, especially given the
growing need for strong governance over revenue. In future it’s possible that certain
activities may be outsourced to benefit from new, advanced technologies.

Fraud management is still emerging
The management of fraud is an evolving activity; 40 percent of the survey
respondents have a dedicated fraud management function, and in two-thirds of
cases this department is less than ten years old. Consequently, it’s no real surprise
that 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, such
as disconnecting subscribers. Almost half of these teams (47 percent) have ‘read
and write’ access to operation and business support systems and 82 percent use
fraud-based alarm monitoring.

Is your fraud management team empowered to take
actions to remediate issues?

1%

22%

77% Yes
No
Other

N = 64 respondents


Half (49 percent) of the respondents claim to use a combination of in-house
and third party RA/fraud management tools when addressing fraud, which
suggests that many telecommunications providers limit their focus to
revenue-related frauds.

25


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


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


In contrast to RA functions, 84 percent of the companies in the survey have a
centralized Fraud Management team, which will aid consistency. Not surprisingly given
the 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


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

Europe, Middle East Africa

27


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. the
56 percent of revenue recovered from subscribers and other partners is greater than the cost of
respondents 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 within
to have a self-funding the next three years.
RA function – up from The longer-established RA functions (those in operation more than 10 years) appear
46 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


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



Of course, there is a strong correlation between the ability to identify and recover
leakage and the incidence of self-funding. The survey suggests that the majority
of companies have not yet built such linkages into their planning; 86 percent of
respondents say their RA budget is not dependent on leakage identified, and few
say their RA function has specific leakage identification targets.
Only a third of survey participants claim to have a pre-defined savings target, which
could 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 team
would be self funding, directly improving my EBITDA and creating
quantifiable value to my organization.

Hugo Eales
CFO
BT Global Services
29


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
N = 65 respondents

Data sources Escalation matrix Issue aging

Execution process Turn around time for closure KPIs and threshold limits

Respondents could select more than one response option.

30


On 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
Enhanced
quarterly 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, Accounting
The right tools for the job? Sprint
Automation can save time and resources and free up RA personnel to spend more
time on strategic issues, so it’s reassuring that 78 percent of the companies involved
in the survey use some kind of RA/fraud management tool. As the chart on page 32
shows, Europe and the Americas have the highest presence of RA/fraud management
tools (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 tools
and 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 sufficiently
trained to make effective use of a tool, which could impact the benefits. In other
instances the RA team may not have been fully involved during the initial business case
and 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
India

31


Presence of RA/FM tool
100
21% 19%
80 31%

60

40 79% 81%
69%
20

0

N = 68 respondents
Yes No


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


32


Percentage of RA checks automated

13% 15%

24%
29%

20%
N = 56 respondents

0–20% 20–50% 50–70% 70–85% 85–100%


Linking performance with incentives
Seventy-three percent of respondents say their companies have defined key
performance indicators (KPIs) and threshold limits at an operational level for their RA
function, which brings greater accountability for revenue prevention, identification
and recovery. This trend is less pronounced in Africa and the Middle East.
However, many telecommunications providers have so far been unwilling to
take 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 management
is not rewarded against performance of the RA function, in terms of the cost of
leakage and the value of revenue recovered. And only 21 percent of respondents’
companies incentivize business function heads outside of RA, which reflects a lack
of organization-wide focus on leakage, prevention and recovery.
This reluctance to link RA performance with incentives is also due to the lack
of a common standard for measuring leakage, making it hard to compare the
effectiveness 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

33


The 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
KPMG in South Africa

34


Skill sets in your organization’s RA function
13.0%
% Chartered accountants/ 16.7%
accountants 20.4%
17.1%
8.2%
21.4%
% of MBAs 7.2%
10.2%
39.3%
% of telecom engineers 31.6%
14.6%
26.5%
25.6%
34.1%
% of other engineers
19.4%
24.5%
52.5%
% of graduates 31.9%
53.1%
49.4%
21.4%
25.3%
% of others
27.0%
25.4%
0 10 20 30 40 50 60
N = 50 respondents

Africa Middle East Europe Americas

Asia Paciﬁc Global

Respondents were able to give multiple answers so percentages may not add up to 100.
Figures might also not add up to 100% due to rounding.

35

Global Revenue Assurance Survey 2012 – Entering A New Era

Global Revenue Assurance Survey 2012 – Entering A New Era

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