1. Converging Customer Life Cycle
Risks Into a Single Department
Javier Mendez-Castillero
Risk Management Director
October 17 2011
2. Agenda
The true meaning of synergies and
efficiency in risk management
From sales to collections, holistic risk
management solutions
Using analytics to predict customer
behavior and mitigate exposure to risk
Using risk management to influence and
increase EBITDA
4. Why Converging into a Single Entity?
• Many hands into one head creates fast decisions
and single coordination of efforts
• Revenue loses, missed cash opportunities and
unnecessary cost are all paid by the company after
all.
• Single objective of the company Get profitable
customers. Only achieved if we create the correct
environment for team work and eliminated duplicity
of efforts.
5. Where are the opportunities for the Company?
ReportedRevenue
CollectedRevenue
Revenue
Leak
6. Where is the Risk in Telcos?
• When something goes wrong, most likely will end up in Bad Debt Expense
• Fraud losses (bad debt mostly) is a direct consequence of credit risk policy
• The key is to find the balance in accepting the most customers with the minimun risk
and have enough controls to minimize errors in operations
7. Risk vs. Risk Management
A risk is a potential, unknown event that can negatively impact the
successful outcome of a project.
Risk is the combination of:
•the Likelihood of an event occurring, and
•its consequence to company when it occurs.
Risk Management: is the strategy across the enterprise designed to
identify potential events and manage the risk within the risk appetite
to provide reasonable assurance of achieving the entities business
objectives.
Consequence
Likelihood
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8. Consequence
Likelihood
Risk matrix and Risk Appetite
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Risk zone beyond
appetite boundary
Risk appetite
boundary
Risk zone only just
within appetite
boundary
Risk zone well within
risk appetite boundary
Risk Appetite
Risk appetite is the level of risk that is acceptable to the organisation.
9. Why Risk Managements Should be Holistic?
• Identify risks that reduces revenue
• Determine likelihood and
consequence
• Adapt the risk to the company
appetite
• Propose actions to treat the risk
• Avoid or Eliminate
• Reduce or Mitigate
• Transfer or Insure it
• Retain or accept it
• Communicate decision plan
• Monitor and review periodically
12. Risk Mgmt. Controls in Yoigo
Preventive Controls:
1. Documentation Control at point of sale
2. Customer data capturing normalization
3. Subscription limit per customer
4. Payment behavior for add-on customers
5. Deny list for known fraud cases
6. Credit scoring for new customers
7. Subscription redundancy verification
8. Sales monitoring of high risk products
9. Verification of bank account veracity
10. Logistics verification check for On-line orders
11. Communication with sales channel
12. HUR reports
13. Traffic Counters
14. Roaming fraud tool
15. Forensic Analysis
16. Payment Behavior Smart Collection Strategies
15. High Risk Product Monitoring for Abuses
Live monitoring of sales of high risk product and take preventive action on
the fly. Normally done for new launches and promotion to test arbitrage
16. Manage exposure risk with credit limit counters
Three different counters (based on money spent)
– Premium Numbers (Voice, SMS y WAP)
– Roaming and International calls
– Total consumption
Two-step approach. Warning SMS and Barring
– Premium 50 - 70€ (Barring Premium)
– International 50 - 70€ (Barring Intl. and Roaming)
– Total Charge 80 - 120€ (Barring outgoing calls)
International NRTRDE traffic counter
– All countries grouped in 3 risk categories lists
– Counter base on number of MTC
– Counter base on rated amount of MTC
Intelligent preventing barring: Only calls allowed to visited
country and home country
17. Forensic Analysis for forged signatures
100% analysis of documentation for all “never paid” customers.
We assume they avoided Fraud and credit controls and we want to learn how
18. Payment Behavior Smart Collection Strategy
Dunning strategy based on customer
payment behavior
– Hot-lining to recurring debtors
– Payment promises to unemployed
– Pre due-date SMS to new customers
– Blaster message to procrastinators
– Intelligent IVR based on
segmentation
Results:
– 70% of collection is done with no
human intervention
– IVR account for 60% of payments
– Reduced cost of collection to 10%
19. Results Obtained by Unifying under Risk Dept.
• Bad Debt ratios significantly low
• First Payment Default bellow 5%
• Traffic Fraud Reduced to 25% of Bad Debt
• Cost of collections bellow 10%
• Automation of IVR
• Hot lining
• Elimination of outgoing call
• Collection ratio of 85% in 30 days
• Reduce collection agency cost (less volume)
• Help the overall growth of company
• Acquiring better customer with low bad debt
• Reducing Churn due to collection issues
• Reducing SAC (Subs. Acquisition Cost)
•Help to maintain high customer satisfaction level
• Simplicity of procceses
