APPLYING THE 80/20 RULE TO TELECOM FRAUD

Also known as the Pareto Principle, the 80/20 rule can be roughly applied to virtually any business need. In the 80/20 rule, organizations are able to get eighty percent of their results using twenty percent of their resources. In sales, 80 percent of all sales may be completed by the top 20 percent of employees. In fraud management, 80 percent of fraud can easily be detected and mitigated with 20 percent of the effort. Many business owners believe that they can’t afford fraud management, when in fact, most fraud can be managed affordably using the right solutions.

The Biggest Risks in Fraud Management

With the advent of services based on the Internet of Things or Mobile Money for instance, the opportunities available to fraudsters are growing. Many organised criminals now have access to virtually limitless resources, which they can use to target businesses until they find a vulnerability – the so-called “weakest-link” within targeted organisations. They are using known exploits to narrow down the businesses that are least likely to be protected. This is where the 80/20 rule to fraud management becomes important.

Small- to mid-sized businesses may feel as though they cannot invest in state-of-the-art fraud management solutions, or consulting and training. And they may be right: it might not be cost-effective for them to do so. However, they can easily afford a solution that will substantially reduce their risk. Though very little can stop dedicated attackers even using best-in-class equipment, a solution that is at 20% of the cost of a tier-one industrial system can stop 80% of the attackers and attacks. Using the 80/20 principle, businesses can manage and mitigate risk without having to invest more than is prudent.

The Importance of Telecom Fraud Detection

Fraud can cost an organisation millions of dollars. Wide-scale fraud can lead to the theft of airtime resources and even financial and personally identifiable information, ultimately leaving a company to not only recover its direct damages but also to revamp its own internal security solutions and policies.

Luckily, most fraud threats are known and can be prevented. Many fraud threats are either already well understood by telecom fraud solutions providers, as they bear certain hallmarks, such as specific behaviours and activities. By applying the 80/20 principle, telecom operators are able to identify and mitigate fraud attacks as they arise, therefore saving themselves potentially millions or even tens of millions of dollars.

Once fraud has occurred, it becomes far more difficult to mitigate. Money that is lost is often gone forever, as it can disappear without a trace. Once information has been breached, there’s often no way to pull it back. A single incidence of fraud can easily spell doom for a company: there are many companies that have shut down entirely in the months following a major fraud attack.

With as many fraudulent attacks as there are each day, businesses need to be vigilant and they need a solution that can automatically detect incidences of fraud. Telecom fraud solutions providers are able to substantially reduce the number of fraud threats that go unnoticed, without increasing the amount of resources and administrative time that the business needs to use day-to-day.

There’s No Guarantee in Security

Even the best, next-generation fraud detection solutions cannot guarantee complete security. There is no system that offers 100% fraud detection, as fraud detection is becoming too advanced. Though a business can invest in the best fraud management solutions available, they may still become the victim of fraud. Not only that, but they will have wasted a substantial amount of money trying to protect against that last 20%. Security is truly a matter of risk management.

Fraud is extraordinarily costly to telecom operators. Not only does it cost the business in money and time, but it can also result in damage to the company’s reputation. By investing in telecom fraud solutions that are fit for purpose, businesses can reduce their exposure and therefore their risk. 

PROTECTING THE CFO – THE SIMPLE SOLUTION TO REVENUE LOSS THROUGH FRAUD

Irrespective of a communication providers’ size, a CFO or Finance Director’s nightmare is to have to explain to his executive team, to his shareholders, to his/her own customers, even the general public in some instances, why they didn’t detect an ongoing financial loss or couldn’t prevent a sudden fraud hit.

The increase in scale and complexity of fraud types around the world creates situations of genuine uncertainty for operators and in turn, their financial controllers. No operator wants to constantly face the threat of being attacked by fraudsters and of having hundreds of thousands or even millions of dollars wiped off their bottom line in a single incident.Yet we see this happening, a lot.

But what price is worth paying to stay protected from financial losses?

Smaller Operators more at risk

Losses directly attributable to fraud and revenue leakage can range from 0.5% of gross revenues all the way up to 15% in certain cases, according to a Gartner report. International Revenue Share Fraud, the deadliest of all fraud types, costs the industry in the region of $6.1bn a year, roughly 20% of all estimated communication fraud.

Although the types of financial risk to which operators are exposed are essentially the same, owing to the global nature of telecommunications, the smaller operators are at a clear disadvantage when it comes to managing risk and preventing major losses. They simply don’t have the experience, the maturity, or the resources to get losses fully under control.

Whether traditional MNO, VoIP, fixed-line carrier or MVNE/MVNO, the price point at which they should seek to acquire loss prevention technology or related services is a critical deciding factor. So, the case for simple and cost-effective tools to de-risk their business becomes a compelling one. There has never been a better time to promote a low-cost technology proposition to the global telecommunications market, even for incumbent operators seeking to drive down supplier costs.

At XINTEC we can help de-risk a business in a very simple and cost-efficient way with a suite of products that are flexible, adaptable, quick to install, and able to deliver measurable results fast.  

5 REASONS WHY SMALLER TELECOM OPERATORS SHOULD LOOK TO TELECOM FRAUD MANAGEMENT PROVIDERS

In September last year, the CFCA published the findings of its latest fraud loss survey revealing that Telecom Fraud has cost the industry an estimated $29.2bn in 2017, which comprises 1.27% of total global telecoms revenue. The good news is that while this is a better result than the previous 2015 survey, the bad news is that fraud remains one of the biggest revenue risks to operators globally, with IRSF in particular remaining the most prevalent type of fraud attack experienced.


What is also becoming clear is that the smaller Tier 2 and Tier 3 Operators and MVNOs suffer the greatest threat from fraudsters, and in many cases are at an even greater risk of fraud than their larger competitors.

Why is this?

Well, reported incidents consistently show that even over short time periods fraud attacks can result in losses of hundreds of thousands, or in extreme cases, millions of dollars to an Operator or MVNO. While fraud losses at this level are significant for any Operator, many larger Tier 1 players can manage the impact of them. However, an incident on a similar scale targeting a smaller Operator is likely to result in a more serious financial impact, sometimes taking years to recover from.

This is where third-party providers can play a crucial supporting role in helping smaller Operators build a stronger resilience against fraud and greatly reduce the impact that fraud attacks are having on their revenue and reputation. We have outlined the top 5 reasons why our customers are now looking externally for telecom fraud management in tackling fraud across their network.

1. Costs

Traditional fraud systems for Tier 1-type operations have been designed with large databases and complex network infrastructures and as such are normally expensive, difficult to install and maintain and requiring resource intensive support.

Smaller Operators and MVNOs do not generally have the infrastructure, resource or available skills sets to manage such solutions, and although scaled down options are being made available; these often still have high total cost of ownership (TCO) impacts.

2. OperationsEstablishing an effective and efficient fraud operation within a small Operator can be a challenging task. Smaller providers tend to be restricted in the number of resources they can make available and even then, often lack sufficient skilled expertise in the Fraud and Revenue Assurance area. Without access to fundamental knowledge of the Telco operational architecture, data structures, services and operational threats, it is almost impossible to implement an effective operational infrastructure to provide adequate protection against fraud.

Secondly, due to the constantly changing technology environment we work in, our industry risk profile is changing almost month on month. So many of the outdated and manual approaches to revenue risk management are simply no longer practical. Similarly, many in-house developed systems which may have been ‘fit for purpose’ for specific revenue risk management issues when implemented, will have become difficult to maintain and adapt to today’s constantly changing risk environment.

3. Technology

The issue of technical architecture is one of the biggest challenges for smaller Operators wanting to establish effective risk management practices. Advancing technology in a competitive marketplace can present obvious difficulties for smaller Operators and MVNOs competing with the larger providers, but it also presents an internal challenge in establishing optimal operations.  

4. Functional Capability

If the Operator decides to self-build an operational solution capability, there are many factors to consider, and significant risks to take into account.

Firstly, finding the appropriate resource internally to create and manage any reporting or alerting infrastructure is difficult, especially with clashes of priorities and responsibilities. Even in situations where this resource is available, development of the appropriate controls, monitoring or reporting can be limited due to lack of knowledge of the issues or understanding of the mechanisms needed to achieve the goal.

Secondly, if an operator does manage to establish a simple self-built control or reporting system, the lifecycle of such a system is limited, as risks change and develop over time, and constant management and updating of such solutions are needed.

5. Knowledge Sharing

As everyone knows, two heads are better than one and organisations that have both in-house and third-party fraud detection capabilities are the ones proved as being most effective at preventing fraud attacks on their networks. Third-party vendors dedicated to fraud are at the coalface of this battle, staying up to speed with the latest industry trends, and often in cases, getting ahead of fraudsters across the globe.