Louise Penson describes how the TDC Group in Denmark put together a plan to control customer exposure

How many telecommunication operators -- or any organisation for that matter -- can tell you at any point in time what their customer exposure is? A pipe dream perhaps? Not according to TDC, Denmark's leading supplier of telecommunication services, who are coming to the end of an ambitious project designed to give them a comprehensive view of the financial risk posed by their customers.
Established in 1990, the  TDC (formerly Tele Danmark) Group comprises a range of business lines including landline telephony, data communications, Internet services, mobile and cable, as well as interests in a number of other European telcos. Towards the end of 2003, TDC recognised the need to improve their credit and fraud management processes, which at the time were based upon traditional monitoring of individual customer entities, and limited to selected parts of the group's major business areas.   
TDC established a project team with the participation of key employees from TDC Solutions, TDC Mobile, IT and shared service functions. As the project evolved to be cross-organisational it was anchored in TDC's headquarters.
The scope of the project was extensive, comprising:
*  Network surveillance and fraud control
*  Bad debt
*  Procedures and governance rules
The main aim of the project team was to attain a complete and comprehensive view of TDC's customer exposure at any point in time -- as viewed from the following standpoints:
*  From individual telephone numbers, to the customer as a whole
*  From individual customers, to the customer base as a whole
*  From each individual business unit, to the TDC group as a whole1
The project team realised early on that efficient monitoring of customer exposure demanded organisational restructuring of the fraud and credit management functions. Previously, fraud management was handled by the network unit, and credit management was handled by the business units. The former decentralised handling of customer exposure was deemed to be incongruous. 
The project team suggested the following as the ideal organisational structure:

[img="http://www.hhcmailer.com/downloads/CustExp2.gif"]

It was believed that this structure would facilitate fast and efficient interaction between the various departments, supporting efficient monitoring of customer exposure. The next step comprised the consolidation and streamlining of the credit and fraud functions, standardisation of processes and procedures within those areas, education of key employees and the identification of requisite IT-support.
TDC put together specification documents that were initially aimed at finding two separate IT solutions, one for credit and one for fraud management. Unable to find a credit management solution that met their requirements they commissioned risk management solution provider Neural Technologies to work with them to transform the requirement specification used for the RFQ process into an operational requirement specification for a credit system, bearing in mind the solution needed to be a combined fraud and credit management system, or as TDC prefer to call it, a 'Customer Exposure System', to support the revised organisational structure. 

The Customer Exposure System

TDC's specification for the Customer Exposure System was extensive, comprising:
*  The ability to detect new types of fraud (for which they stipulated a neural network system)
*  Improved credit rating on new activations
*  Advanced warning of bad debt and prioritisation of alerts/cases. 
Crucially, TDC wanted to ensure that the acceptance of any large exposure was based on approved business procedures. The functionality of the new system will put an end to the traditional credit monitoring, based on fixed credit lines for each type of customer that is, in turn, often based on external parameters. Traditional credit monitoring is often performed on alerts based on high usage, excluding information of the customers' previous usage and payment behaviour. 
The system allows TDC to set an individual exposure limit for each customer based on the customers' behaviour. The exposure limits ensure that alerts are raised when customers change usage pattern or payment behaviour. Furthermore, the functionality impacts prioritisation of alerts, and the number of alerts that have to be investigated -- which will be determined on the basis of the actual customer exposure. Finally, neural functionality is expected to support the identification of the customers' usual usage and payment patterns. 
These exposure limits will be calculated on a daily basis for each customer (person or legal entity) and automatically adjusted over time based on the customers' usage, provided that the customers meet certain criteria (i.e. no adverse credit history in TDC and that their invoices are paid on time etc.). Adjusting exposure limits based upon usage and payment behaviour will enable TDC to achieve more efficient monitoring of customer exposure, which may even increase customer satisfaction.
TDC also set out to protect their customers, by having prior knowledge of customer exposure and behaviour, from unintended increase in usage -- often resulting in hefty invoices and possible default in payment. TDC stipulated that the solution should provide a full and complete segregation of customer data between the different business lines in order to comply with the aforementioned Danish law. Neural Technologies were able to create individual user profiles and segment these profiles along with their associated customer data to meet this challenge.
TDC Solutions and TDC Mobile have a large number of systems containing customer information needed for preparing customer exposure. Often, telecommunication companies monitor customer exposure on the basis of billed traffic: TDC includes unbilled usage etc. to get the total overview of the customer exposure.  The new customer exposure system aims at bringing all that data together from the disparate systems, allowing TDC a clear view of the exposure posed by any customer.
TDC expect the project to be an immense success.  One of the major factors behind this success is the resounding support from TDC's executive management and the strong leadership that was able to get 'buy in' and consensus from the various different business units. 
TDC's Senior Audit Manager, Marianne Holmbjerg, who was a key proponent and major driving force behind the project, notes: "At the start of the project the different business units had disparate working methods due to decentralisation. Now the business units are working with one common goal. We are expecting to reduce duplication of effort and to optimise and standardise our processes for customer response and monitoring of customer exposure. We now have the basis for an increased awareness of risk and have improved the sharing of knowledge between various functions -- Revenue Assurance, Fraud Management and Credit Management -- in each legal entity.
"Our customer exposure monitoring will cover all categories of customers. In addition, we will be able to monitor and assess fraud and credit risk on new services and price plans. Overall we have enhanced data visibility leading to a vast improvement in decision making".
Paul Bowler, Deployment Manager for Neural Technologies, adds: "The fact that fraud and credit risk is now managed within a single system gives TDC a holistic view of any issues, and means that potential losses are more likely to be identified. Particularly given that there is often crossover between the two functions. For example, what starts as a fraud can end up as a credit alert if the expected exposure is exceeded due to high usage. Furthermore, the solution ensures TDC fulfil their accounting principles by providing clear fraud and bad debt definitions."
The new system is supported by TDC's existing processes, which comprise, for example, credit vetting on new activations, monitoring of accounts receivables, dunning processes and monitoring of network performance. At the moment the system is in a testing phase on live data and is expected to be fully implemented by the end of the year. The user acceptance tests of the "Customer Exposure System" on synthetic data gave rise to almost no corrections. 
The Customer Exposure System initially covers the business units of TDC Solutions and TDC Mobile. It is envisaged that TDC's other business units will be incorporated over time.                                             n

1 Ensuring that the organisation working within the premise of current Danish law, which prohibits the exchange of customer information between TDC's separate legal entities.

Louise Penson, Neural Technologies, can be contacted via tel: +44 1730 260256;
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