Poor processes and procedures threaten revenue loss for mobile network operators

Poor processes and procedures threaten revenue loss for mobile network operators

A recent survey by risk management specialists Neural Technologies provides an important but troubling insight into the fraud and revenue loss risks encountered by mobile network operators and other communication service providers.

The ‘Telecoms Risk Management Global Survey 2016’ estimates that poor internal processes and procedures are the biggest contributor to revenue loss in the sector.

Telecoms operators globally face average losses of 13.1 per cent – totalling around $294 billion – as a result of losses to intentional fraud and other uncollected revenue.  This 13.1 per cent splits down to 6.9 per cent in hard revenue losses resulting from factors such as internal and external fraud and bad debt, and 6.2 per cent in missed revenue due to failings such as poor processes, incorrect data usage and suboptimal call routing.

Fraud and revenue losses vary considerably by region.  The highest levels were reported in Central Asia, Africa and Eastern Europe – at 17 per cent, 16.7 per cent and 15.8 per cent, respectively – while the lowest levels were recorded in South-East Asia (8.6 per cent) and Western Europe (8.2 per cent).  The figure for North America was slightly below the global average, at 11.5 per cent.

On average, respondents identified poor internal processes and procedures as the single greatest source of revenue loss, although there was some regional variation – for example credit management issues were judged to have the most impact in Eastern Europe.  Other factors identified as causes of revenue loss included internal and external fraud (including fraud by other operators), poor systems integration, invoicing system errors and partner payment errors.

Neural Technologies’ analysis of the survey responses suggests that in recent years responsibility for fraud and revenue leakage in the sector has seen a shift from direct Chief Executive or Chief Finance Officer involvement, to specialised (and often multidisciplinary) teams with devolved responsibility for revenue assurance.  Only two per cent of survey respondents were of CEO or CFO level, while 48 per cent were heads or team leaders of a dedicated fraud or revenue assurance department.  In more than 50 per cent of companies, however, the Chief Financial Officer still retained ultimate accountability for matters relating to fraud, credit risk and revenue assurance.

The increasing emergence of dedicated revenue assurance teams could indicate that the sector is placing greater emphasis on proactively tackling and reducing exposure to fraud and revenue loss.  On the other hand, there should be no doubt that a $294 billion revenue loss should be considered a key C-suite issue, particularly as communication service providers become ever more integrated into the provision of financial services and transactions, via technologies such as contactless payments and mobile banking apps.

Neural Technologies’ Chief Commercial Officer, Luke Taylor, said: “The telecoms sector is significantly expanding its services around the world with faster broadband, 4G/5G roll-out and more connected devices.  Our survey reveals that new services create both new revenue opportunities and risks for operators and the challenge is to secure the upside and minimise the losses.”